Hi Metta,
You can create your artwork in any software and import into Photoshop to use Kwik to build your app. Illustrator or Photoshop are both fine. So use the software that you like best.
However, your artwork will be converted to png format when you publish your app.
Even if you import or paste your Illustrator vector graphics into Photoshop as a path or smart object, Kwik will export your artwork as pngs or jpgs, when it build your book app.
Hope this helps,
diane