The maths is a little bit complicated and made a little bit more complicated by KBC's method of calculating interest on the basis of a 360 day year whereas most banks use a 365 day year.
In short when KBC say their account pays 3% AER they mean they would pay 3% on a 365 day year but because they actually use a 360 day year it means the actual rate used for daily interest calculations is (3.0/365)*360 which is 2.96%.
So, each day, the interest earned is (that days balance) multiplied by (2.96/100/360) which, for your initial balance of 11,000 would be 90.44c each day.
When the interest rate drops from the advertised AER OF 3% TO 2.6% then the actual rate becomes (2.6/365)*360 which is 2.56 and the daily multiplier becomes (2.56/100/360) which, for your initial balance of 11,000 would be 78.22c each day.
Fair play to you if you were able to follow that.
In terms of it being the right account for what you propose. It will certainly do the trick and gives you easy access to your funds at a good rate of return. If you want to get the best return possible and don't think you will need access to your money in the near future, then it might be a good idea to put either the entire lump sum of 11,000 or a large chunk of it into a fixed account for a year or 18 months. Then you could save the 700 a month into a regular saver account each month.
If you check out the best buys thread you will get a good idea. For example you could put your 11,000 into the PTSB Interst First Savings Account, it pays 3.06% fixed and gives you the interest up front instead of having to wait a year. You could then put this upfront interest payment of around 225 from this account into a PTSB Online Regular Saver account and start putting your monthly lodgements of 700 into this account too and get a return of 3.5% variable.
A lot of the decision of what account to open comes down to whether you think you will need acces to your cash or not. Instant access means lower rates. You get higher rates locking the money into a fixed term but you need to be sure you won't need access to your cash in the meantime.
On a final note interest rates are not the be all and end all, consider this.
10,000 saved for one year at 3% will return you 300.
10,000 saved for one year at 2.5% will return you 250.
So all the hassle of moving accounts for an extra 0.5% will make you an extra 50 Euro, on which you then have to pay DIRT at 33%, which leaves you ony 33 Euro. It doesn't seem like much return for all the effort.