"Is it possible to shim the stock fork springs up to increase pre-load on a KDX220?"
Yes, but most everyone would agree that it's a bad idea.
"...but if this method would work just as well"
If it achieved what everyone wants, then this forum would be full of "where to get some real long spacers" theads. What you are wanting can not be achieved by longer spacers. Adam728 said, "And your spring rate will be the same, you just start off stiffer due to the extra preload." That is exactly what will happen. More preload = a higher ride height and it will take a larger bump to get the fork springs moving.
"Do the stock springs still have "give" in them when the fork bottoms or are they completely compressed?"
No, they will completely compress and they may be damaged.
Stock travel is 11" or so. The gaps in the coils add up to more than this. One COULD preload it so much that the amount of gaps would equal less than 11" when starting off. When this magic line is crossed, THEN you will completely compress the springs and possibly damage the forks. Travel would only be reduced if you cross this measurement barrier.
In other words, just get some springs that are the correct rate (stiffness) for the comination if your weight and the bike's weight. Preload is used to adjust the ride height. For most people, a KDX has "too soft" springs, and the large amount of stock preload is used to adjust the ride height, so the nose is not pointing down, as it would with a modern amount of preload.
Good luck!