I prefer Kathleen, and I prefer it with a K. K/Cathlyn doesn't interest me at all, and once I knew a Catheline who pronounced it cath-uh-leen; I called her Cathy in sheer self-defence.
I was at school with a Kathleen who was known as Kathy: good name for a good person. I don't think it's dated and I'd love to see it used.