I just left KL after having spent 2 years there. I've been to Penang but I don't "know it" the way I "know" KL!

Chicken satay is readily available in the night markets and hawker stalls. Generally, there is beef satay, as well. I'm sure that you can find sticky rice and papaya salads at some hawkers - the night market where I bought most of my street food did not have any Thai vendors, and these foods were not offered there. I would expect that many of the hawker centers would have Thai vendors, especially in Penang, since there is more of a Thai influence there.

I have never gotten the slightest bit ill from eating street food in Malaysia. If the hawker is busy, you know that the food is good - they develop a loyal following! I haven't seen whole cooked chickens for sale by vendors, though you can buy the uncooked kampung chickens on the street for around 10 rm (US$3). And yes, there is always a huge variety of foods - it's truly a multi-ethnic country, and Malaysians love eating.

Tap water is safe to drink in KL, though most people will boil it first (get one of those electric water boilers at Jusco). I believe that it's chlorinated coming out of the tap. Bottled water is available everywhere and all restaurants will use purified water, as well. I'm not sure if the tap water in Penang is safe to drink "as is." My guess is that it would be safe, since Malaysia has been working on having potable water available to everyone as part of it's development plan.

Not sure about rents and neighborhoods in Penang, but here's a website which might be helpful: Penang Property: Real Estate Properties in Penang Malaysia. I would think that US$400 would be realistic for a condo as you described, but it would depend on the area.