I feel for you.
You are tasked with modifying very bad code.

Things go wrong from the very first program statement.
cwd is a "buzz word" meaning: current working directory.

Without getting into fancy stuff, I show below why the first statement is wrong ('cwd' is almost certainly not what is intended for $Kitdir). And then I say that there is no need to translate "forward slash" to "back slash". Perl will do that for you when it is necessary as a path name! I show you that this translation works, but don't do it!

$KitDir = cwd;
print "$KitDir\n";    # prints 'cwd'

use Cwd;
$Kdir = getcwd();     # $Kdir is: Where am I?
print "$Kdir\n";      # prints 'C:/TEMP'
$Kdir =~ s|/|\\|g;    # not necessary! Don't!
print "$Kdir\n";      # prints 'C:\TEMP'
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So that covers your first 2 program statements.

$ENV{'KITDIR'} = $KitDir; #assigns $KitDir value to
                          #KITDIR key in ENV hash
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In the below:
I don't think that $ENV{'KITDIR'} will wind up with what you think it will.

$KitDir = $ENV{'KITDIR'};
if ($KitDir eq "")
{
    $KitDir = $Config::Conn{KitDir};
}
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I suppose we could have:

$ENV{'KITDIR'} ||= $Config::Conn($KitDir);
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but it is hard for me to see how $ENV{'KITDIR'} could be false given the above statements.