I'm British, and I've not seen it written this way before, although I've certainly heard it this way, just as you hear e.g. "'ster Jones" for "Mr. Jones" (at least in GB).

Are you asking about how you should say it? If so, say it the way it's written, it's perfectly natural to say it this way in British English.

I wouldn't say it or write it this way. To me it's not slang, just a phonetic rendering of quick and sloppy speech. You might hear it from someone, but if you interrupted them and asked "what did you just say?", they'd undoubtedly respond "I said OK", not "I said 'kay". In other words, they would not think they were saying "kay"; they'd think they were saying "OK", even though speaking quickly they might hardly say the first syllable.

I say " 'kay " reasonably often when speaking informally, but only if it's at the start of my sentence. (As Eric says, if it is not the first word, the "o" is almost always pronounced.)

when I hear someone say 'kay, it is normally a child, I see it as being quite a cute thing to say.

a) "Okey" is definitely not correct. It's spelled "okay".

n) Dozens of variations seem to exist -
"kay"
"mmkay" (South park)
"k" (e.g. in WoW chat)
"okie dokie" (aaagh)

and even, the worst I've heard so far, "okili dokili" [I heard that one in Carinthia though. Most people there can barely speak German that is recognizable as such, much less any other language, so I hope that this one is a regional variant that will die out soon].

Thank you all so much!! This is a tremendous help to me!

@xy

That was probably a quote from the character Ned Flanders from The Simpsons...