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But in Japan, is the culture there to associated all the Mc's with McDonald's, like in America? Do they even have the "Dollar" menu (Yen menu?).

Anyways, I doubt naming McKernel had any thoughts of McDonald's and the implication of the cheap dollar menu.

They have おてごろマック, which is ¥200: http://www.mcdonalds.co.jp/menu/otegoro/

They'd have called it the Kernel Royale.

Kernel Royale doesn't sound cheap to me, in fact, sounds regal =P

Royale with cheese!