Note that "Kernal" was the correct spelling used in period Commodore manuals and documentation.

Oh wow, I didn't know that. Every time I see it spelled that way, my mind assumes some kind of script-kiddie/1337-speak vernacular.

I lost count of how many people corrected me on that (saying it was Kernel) :-)

I always wanted to know why this name was chosen.

Wikipedia claims it was a typo that stuck around.