He feels like when he gives KT to me about any functionality then 100% of that should have been grasped by me.
Well, that is the point of communication, yeah?
The thing that I've seen happen quite a bit in knowledge transfers is that people think it is a one way dump of information. And unsurprisingly, that goes really badly. The point of a knowledge transfer, and communication in general is understanding.
Having the person explain it to you is only half of the job. Your part of the job is to ask questions and otherwise communicate until you have sufficient understanding of what they're trying to tell you. Writing down notes isn't going to make you understand what you've written any more. Saying "oh, this will make more sense when I see other parts" is a dangerous guess, since you don't know about the other parts.
At the very least, you need to make the other person understand when you're not 100% clear on things (and why). They can then try to elaborate, or move on to some topic that should help your understanding. And they can be prepared for follow up questions later.
Should I escalate this issue to reporting manager, or just say "even if you have explained it to me, grasping it 100% is not practically feasible"?
During your 1:1 with your manager (which you have, since it's the #1 thing for managers to do, right?) I would bring it up. They might have solid advice about how to deal with the other engineer. "Escalation" seems premature, since your first step should be to try to work through problems yourself.
Sure, perfect knowledge transfer is a pipe dream, but if you're asking enough repeat questions for this to be a problem, the problem probably lies outside of the inherent inefficiency in knowledge transfers.