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Katy is really popular in my age bracket. It seems like everyone is going by Katy--although it's typically spelled like Katie.

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My family calls me Kaity sometimes, but I don't really like it. It's too infantile and the name is too closely associated with stuck-up princesses now.

I like it.

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My only problem would be it's popularity. I don't know about young kids, but I'm 20 and there were 4 Katy / Katie in my class at school (and even more then that in my year overall).

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Also, since Katherine is so popular, even if Katy is not, there are bound to be loads of Kate, Kitty, Kathy etc.