KB's are great for user generated content (just look at this one). If it was open to all just imagine how many links it would be attracting!!
Obviously your KB would be for SEO benefits, and therefore the best method for gaining from it would be to host it on the clients domain in a sub folder. Most open source CMS's can easily be modified into Knowledge bases with relative little ease - one thing I should recommend is heavy moderation on all posts to ensure that no incorrect answers or spam goes live, as this would make their business look poor.
Regards
Aaron