A quick google search:
Breeding Kuhli loaches - Loaches Online Forum
Baby Kuhli Loach Explosion - Loaches Online Forum
Anyone is free to draw their own conclusion from the experiment, it's entirely possible that they hate gravel but were forced to scrounge in it and it's also possible they're comfortable in it too. Sadly we can't talk to loaches so experiments like this are where we begin.
As for breeding them, it's probably been done in
sand too. There's no wrong way to do it, and the fact that they spawn and have surviving fry in gravel isn't some kind of unfair advantage or coincidence like you seem to imply, it's evidence that the substrate hasn't bothered them enough to deviate from their ultimate natural objectives.
I've kept kuhlis in gravel and sand, and when they were in a gravel tank, they were shy and they hid during the day at first but after a while they began to be active in broad daylight as well, even when I had only 2 or 3. They're not like tetras who shut down without a shoal, they can function normally in terms of staying active. Are they happier in greater numbers? Yes, that's exactly what I said.
In the end, it's impossible for us to truly understand the mind of a fish and all we can do is draw conclusions from observations. It's dangerous to believe something is the only truth simply because "it's common sense;"
all of my observations and anecdotes of others have only suggested that they can thrive at least as well on gravel as on sand as long as the material isn't sharp enough to hurt them.
If reproduction and general vigor and vitality aren't indicators of a fish thriving, what is? People are now able to keep many fish alive much longer than they would ever survive in the wild, in conditions far from replicating their native habitat. It's my belief that there isn't a single "right" way to keep fish.