no, it wont operatesin kernel mode, it operates on usermode.
hardware mode
The shell is made up of several subsystems that all operate in user mode. The kernel, or core, of the OS is responsible for interacting with hardware. It has more power to communicate with hardware devices than the shell has, and operates in kernel mode.
Code running in kernel mode has unlimited access to hardware and CPU. Code in user mode can't address memory that kernel mode does not allow it to.
no commentment
The Executive Services, the Hardware Abstraction Layer (HAL), the microkernal, and kernel mode drivers
User mode and Kernel mode
Kernel ModeIn Kernel mode, the executing code has complete and unrestricted access to the underlying hardware. It can execute any CPU instruction and reference any memory address. Kernel mode is generally reserved for the lowest-level, most trusted functions of the operating system. Crashes in kernel mode are catastrophic; they will halt the entire PC.User ModeIn User mode, the executing code has no ability to directly access hardware or reference memory. Code running in user mode must delegate to system APIs to access hardware or memory. Due to the protection afforded by this sort of isolation, crashes in user mode are always recoverable. Most of the code running on your computer will execute in user mode.
user mode and kernel mode
kernel mode
The Windows XP Architecture uses both Kernel Mode and User Mode. The kernel mode is the layer of the operating system's code that is responsible for handling such fundamental operating system items as virtual memory and scheduling which applications will run at any given time. User mode is where your actual program runs and is controlled by components of the kernel. For example, the kernel is responsible for allocating the memory that an application uses.
bt.o is the kernel mode driver. When you insmod bt.o you are inserting it into the kernel, where it can cause bad things to happen if it screws up. btduser is the user mode driver. It runs as an application in user space, where usually the worse thing that can happen is a segfault. You don't have to insmod anything for user mode. You just run the application.