You have one of the best problems to have as a 3.X GM. If there's a certain part of the game world that the players clearly want to engage with, then you have an easy way to give players exactly the kind of content that they want. Here is some advice on how to handle this new castle.
Don't use the Kingdom Building rules
It's really tempting to use a set of rules that you find, I know, but the Kingdom Building rules don't really do what the players want to do. As you noted, the rules are really complicated and have a ton of moving parts that don't actually help with the idea of making a frontier keep like they want. I wouldn't say that the Kingdom Building rules are bad, per se, but they're built more for a group that cares about the specific numbers involved in making a kingdom, rather than the broader aspects. Definitely use parts of these rules for inspiration, but don't use the whole thing unless the group really does want to deal with minutiae all the time.
Change the focus of the campaign to the castle
If your players really want to do stuff with the castle, change the geographic focus of the game to be near the castle. Maybe their current quest giver wants them to tame that section of wilderness, or maybe the BBEG finds that they need to kidnap people from a specific nearby village for a dark ritual. However you do it, if the players really want to have a castle, then make it so the game works with that, instead of fighting it.
Give them both RP and mechanical bonuses
In medieval times, people who lived near a castle would pay taxes to the owner of that castle, in exchange for defense from threats and such. One option that I've seen used is that the owner of a castle would get a significant portion of their wealth-by-level as taxes from their populace, so it feels like keeping up the castle and the surrounding lands gives them more money. In addition, maybe give them titles and show them how their subjects are happy with them (assuming that they're at least decent rulers).
For example, let's say that the party is 10th level. They should have 62,000 gp in wealth, and should gain an extra 20,000 gp by the time they get to level 11. In this case, you might give them 5-10% of their wealth for this level, roughly 1,000-2,000 gp for each party member, every month or so. You should take into account how much time you expect them to spend between levels so that you don't give them too much or too little money. If you find that they have too much, give them something to spend it on. Maybe an alchemist wants to set up shop in town, but needs some seed money to get started. Maybe a caravan of dwarven merchants want to sell you high-quality weapons for you soldiers.
Use "Yes, and..." as much as possible
There really aren't a lot of good rules for making and building a kingdom that aren't either super expensive or super complicated. Rather than getting hung up on exactly how things work in the rules, just wing it. If the druid wants to help out farmer's yields, then let him. Tell him that the farmers now have better yields than they ever have, and they started celebrating "[druid's name here] Day" in honor of how much he helped. Maybe give the mage some free spells or spell research, representing the fact that he can copy spells from his student's books with impunity.
Also, if your players want to add some kind of magical structure to their castle, don't use the standard magical creation rules. The normal rules are geared towards stuff that players can carry around with them, and are very much overpriced for a game that focuses on a large structure like a castle. A rule of thumb to use is that if the players want to add a spell to one section of the castle (say, the walls, or the border towers, or the keep), charge them what it would cost to make a similar item for one player, rather than trying to multiply the cost over the larger area.
If your players want to build other structures, charge them based on how big the thing they're building is. If they're building an inn, watchtower, or other single-building structure, charge something like 10,000 gp. If they're building a fort, or walls for their keep, charge more, maybe 30,000 gp. If they're building something huge, like a whole new castle or a massive aqueduct, change more like 100,000 gp. The precise numbers don't really matter. What matters is that the players feel like they're spending an amount of money that doesn't feel trivial, and that they feel like they're getting something for that money. If your players never have any money, then charge less. If they're particularly flush, charge more.
Use kingdom-level threats, rather than adventurer-level ones
Maybe the kingdom next door wants to take over some of your now-fertile land. Maybe bandits are causing problems with caravans. Maybe a necromancer is causing all of the dead in the land's graveyards to rise. Maybe there's a war in an allied kingdom, and you need to send off troops to help out. Whatever plotlines and threats you develop, try and make it so the kingdom is tied in. It's okay to occasionally just do another dungeon delve, but if the players care about their kingdom, then reward that passion by involving the kingdom in the game wherever you can.
Basically, my suggestion would be to follow these rules of thumb:
- Make the castle the focus of the game.
- Work with your players to let them do what they want.
- Don't use complicated rules systems when you don't need to.