I had crack in the exact same place on a K40 Covert (steel frame). I contacted Kahr, spoke to Dottie, and they simple asked which Kahr I wanted as a replacement. The K40 Covert has been discontinued a number of years ago. I bought one NIB in Oct of 04 that had been on the dealers shelf for a long time. I sent it back to Kahr in Feb of 05. It took me about 2 to 2.5 weeks to get my replacement.
Mine developed the crack after about 200 rounds just like yours. Kahr will stand behind their product. I requested a MK40. They replaced it with a MK40 with NS. Another tip if you are are planning on replacing your MK40 Elite 03 with another one, do not return the mags when you send it back. Your replacement will come with 2 new mags. Also If your Mk40 Elite 03 does not have night sites, I would request that your replacement does.
I paid $419 for my K40 Covert, my replacement retails for at least $100 to $150 more, if not more. You paid top dollar for your Elite, I would expect some upgrades on your replacement at no charge. Make sure your requests are included in the letter that you send when you return your MK40 Elite 03. Kahr should offer to have it picked up and pay the freight both ways.
Your replacement will need to go through a FFL and you will need to fill out a new from 4473.
Just remember when you get a hold of Dottie, be polite. You will get better service.
Dottie said the crack is caused by a poor heat treating.
Also check out the Kahr Club forum at www.Glocktalk.com. It is under the Gun Related Clubs. It is the most active Kahr Forum I have found.