TE on the Mac is certainly system-wide – at least – I’m struggling to think of an application where it doesn’t work?
That said, I think your comment might stem from what you heard about the iOS equivalent of TE. Apart from the TE keyboard, which is not particularly good, unfortunately – for the text snippets to automatically expand within other iOS apps – they need to be integrated with TE (as in, that developer must enable the two-way communication, it is not automatic due to sandboxing etc.).
Regarding your first question — KM can be used for text expansion.
During TE’s switch to subscription mode, there were a bunch of users who didn’t want to go that route, and started looking around for alternatives.
There are some text-expansion standalone apps that are not subscription-based, that some moved to. Others started looking at options such as Alfred (the launcher), that can also do text-expansion – and of course, KM.
With the exception (possibly?) of Typinator, most of those options – not being dedicated text-expansion apps – are always going to be a less feature-rich.
However, that would be completely dependent on what type of text-expansion one is looking for, and how advanced it needs to be.
I stuck with TE, since I had already put in hours creating my library – and despite being able to get it out of TE – I was quite happy with it as a product. I found their support to be quick, and the editor (where one constructs the snippets) to be very user-friendly.
I also appreciated the notification pop-up that reminds me when I have typed something I already have a snippet for, or suggests a snippet when it notices I have repeatedly typed the same word/phrase within a specific period of time – AFAIK, those features are only available in TE.
The above is why I opted to keep using TE.
That said, pretty sure others will have compelling reasons for why they moved away from TE – not suggesting that wouldn’t be the case!
Coming back round to your question again – KM can do text-expansion, but whether it should, or whether or not it will be the ‘best tool’ for you, will depend completely on what it is that you are looking for.