Here is an idea I had some time ago. I thought I had posted it here already, but looking back though my old mail it seems that I didn't. Sorry if I am wrong about this...
It really messes up the "single object identity story" in the Kansas user interface to have both morphs and outliners for the same object present on the screen at the same time.
I can feel a little better about this if I think about the outliner as the morph for the mirror of the object - then we have two morphs for two objects. I would prefer, however, to have the outliner appear with the corresponding morph embedded in it as its title. Instead of having the outliner say "aCircleMorph" it would show the circle morph near its top. The outliner would pop up in such a place that the circle morph would be at the exact same spot it was before.
What if the morph has other morphs embeded in it? No problem - the whole morph-tree would be the "title" for the outliner and the user would have to understand that the outliner was for the "lowest" morph of the bunch.
What if the morph is embeded in some other morph? This is very tricky to solve, but I would "grow" the outliner under the given morph but over its sibling and parent morphs. The outliner would be pseudo-embeded in the morph's parent visually, but shouldn't have any effect on layout. One problem with this is that browsing more than a single submorph would lead to a great visual clutter. If it is easy to sprout and shrink outliners for these embeded morphs, however, limiting oneself to looking into one morph at a time won't be such a big bother.