Along with adding it to the allowed types you will also need to remove it from the banned types. This is in the KFM configuration.php file that is located at HTMLEditor > editor > plugins > kfm > configuration.php.
In here you need to find the variable name $kfm_banned_extensions around line 128. In here you need to remove the php entry so that it looks like this:
php:
$kfm_banned_extensions = array('asp','cfm','cgi','php3','php4','php5','phtm','pl','sh','shtm','shtml');
Keep in mind though that this can present a major security issue if anyone gains unauthorized access to your editor pages. If someone uploads a php file it can then be executed by going to the URL for it.
