For animation/art quality I think they're in the top tier with quite a few other studios. They're definitely A-List, but no better than the likes of any other studio that gets name dropped on these forums IMO. Of course if you don't watch shows by other studios you'd never know this and probably want to praise them for it.
Music they are a mixed bag. They can get good music going in their stuff like with the Haruhi film, but the rest of it is either taken from the source material (Key) or bleeps and bloops. To me they only seem to care about having memorable soundtracks to their shows every now and then.
The adaptation thing I found kind of annoying too, especially in the case of Disappearance where I don't think it being a straight verbatim adaptation helped the movie at all. Rather it dragged more than any studio should let a movie drag during the beginning section for no good reason. It's a common problem with B-Movies where the scriptwriter lacks the ability to fill a feature film with enough actual content resulting in a dreadfully slow pace of nothing happening and the plot becoming a dragged out mess, but with Kyoani there it was a refusal to leave even one line of dialogue or page of story from the book out.
What they don't seem to realize is book/=movie and that it's really quite okay to trim the fat so to speak in order to keep the movie flowing along in a way that won't lose the viewers attention. For diehards of course this is no problem, for everyone else it's a death sentence. To me there's a difference between preserving the source material and relying entirely on it, and Kyoto Animation operates somewhere in between.
I find it kind of amusing that some of the more die hard fanboys have started trying to cannibalize the less die hard. Perhaps this event should have been expected and be allowed to pass cause I can think of no better potential wakeup call for that fandom then to have it turn on itself as a result of it's own zealotry.