Kakashi Hiden falls under the category of c-canon (continuity canon) because while it was written by a different writer, Kishimoto supervised and approved the novel. Kakashi Hiden occurred before Kakashi took office as the sixth Hokage. Kahyo is supposed to be executed but Kakashi reduced her punishment to life imprisonment and made her the new warden of the Blood Prison.
In the epilogue of the novel, Kakashi received a letter from Kahyo and Naruto is spreading rumors about Kakashi and Kahyo's relationship, which Kakashi denies. The last statement of the novel says, "Springtime is around the corner", which is, in Japan, a metaphor usually used to refer to a blossoming romance, but others interpret the last statement as a reference to "change" or think it refers to the actual spring season.
In chapter 700 of the manga, after Kakashi has stepped down and Naruto has become the seventh Hokage, everybody is shown alongside their partners (except for Rock Lee who is shown training with a kid, and Ten Ten who is at a shop). But Guy and Kakashi are not shown with their "partners". It isn't even clear if they do have partners. Kakashi also says that he is going on a tour or something.
So, is Kakashi in love with Kahyo from Kakashi Hiden? Did he end up with her and settle down with her? If he did, how does it work when Kahyo is serving her life imprisonment as a warden at the Blood Prison? and why aren't they shown together like the other couples in Chapter 700?