Same issue here. If I have bluetooth and WiFi active at the same time, eventually (usually within ten or fifteen minutes) the WiFi connection will freeze up. If I turn off the bluetooth, the WiFi connection will instantly unfreeze. Having to turn off bluetooth to get a stable WiFi connection is a huge bummer (funny, having WiFi on doesn't impact my bluetooth connections).
I've spent a bunch of time looking at threads and articles describing the same issue. Short answer, apparently this bug doesn't affect everyone, it is an issue with the bluetooth coding (which is new) in Kitkat, it isn't just our device, and despite a dozen or so listed workarounds, there doesn't appear to be a fix. Trust me, I've tried everything to get this fixed from two factory resets to renaming the bluetooth device profile, resetting my two routers, turning off 5 GHz, deleting and re-pairing my devices, running ART instead of Dalvik, running in safe mode. I'm probably going to just give in and get a replacement device. Sigh.