From a currency point of view, having 1 KB be 1024 Bytes would cause all sorts of problems to users having to figure out exactly how many bytes to transfer to another user if they wanted to transfer ie 4 MB :)
The wallet allows the user to change the notation to Bytes, KBytes, MBytes and GBytes. Most users finds MByte to be the better choice leaving less zeros in amounts to transfer, and often less decimals to be necessary.