Is the "k" in "kjøtt" pronunced? Or is it silent?
Yes, 'kj' represents a sound, so the 'k' isn't pronounced per se. The 'kj' sound is a palatal sound, made by raising the back of the tongue towards the palate. When I say 'kjøtt' I don't smile at all :) I don't move my lips more than I do when I say 'øh'.
There's a whole Wikipedia-article on the sound (there is one such article for pretty much every sound there is in any language). Maybe that can be of interest.
I agree with you both, it's like that. Maybe it's a little bit softer or less forceful, in a slightly different area of the mouth, but it basically sounds the same. A lot of people don't really say it that way, though. Many tend to say it as a "sh" sound, so don't worry too much about it if it trips you up. If you find yourself in a tongue-twister and want to avoid the 'kj' sound, saying it as a 'sh' definitely sounds better than staying closer to 'k'.