Knights of the Old Republic is C-canon, so it is true unless overridden or contradicted by a movie or Star Wars: The Clone Wars and the Star Wars live-action TV series.
About SW Canon:
Star Wars canon is: (in order of precedence): G-canon, T-canon, C-canon, S-canon, and N-canon.
G-canon is absolute canon; the movies (their most recent release), the scripts, the novelizations of the movies, the radio plays, and any statements by George Lucas himself. G-canon overrides the lower levels of canon when there is a contradiction. Within G-canon, many fans follow an unofficial progression of canonicity where the movies are the highest canon, followed by the scripts, the novelizations, and then the radio plays.
T-canon refers to the canon level comprising only the two television shows: Star Wars: The Clone Wars and the Star Wars live-action TV series. Its precedence over C-Level canon was confirmed by Chee.
C-canon is primarily composed of elements from the Expanded Universe including books, comics, and games bearing the label of Star Wars. Games and RPG sourcebooks are a special case; the stories and general background information are themselves fully C-canon, but the other elements such as character/item statistics and gameplay are, with few exceptions, N-canon.
S-canon is secondary canon; the story itself is considered non-continuity, but the non-contradicting elements are still a canon part of the Star Wars universe. This includes things like the online roleplaying game Star Wars: Galaxies and certain elements of a few N-canon stories.
N-canon is non-canon. "What-if" stories (such as stories published under the Star Wars: Infinities label), crossover appearances (such as the Star Wars character appearances in Soulcalibur IV), game statistics, and anything else directly contradicted by higher canon ends up here. N-canon is the only level that is not considered official canon by Lucasfilm. A significant amount of material that was previously C-canon was rendered N-canon by the release of Episodes I-III