Investigations of the quasifree reaction A(γ, KY)B are presented in the distorted wave impulse approximation (DWIA). For this purpose, we present a revised tree-level model of elementary kaon photoproduction that incorporates hadronic form factors consistent with gauge invariance, uses SU(3) values for the Born couplings and uses resonances consistent with multichannel analyses. The potential of exclusive quasifree kaon photoproduction on nuclei to reveal details of the hyperon-nucleus interaction is examined. Detailed predictions for the coincidence cross section, the photon asymmetry, and the hyperon polarization and their sensitivities to the ingredients of the model are obtained for all six production channels. Under selected kinematics these observables are found to be sensitive to the hyperon-nucleus final-state interaction. Some polarization observables are found to be insensitive to distortion effects, making them ideal tools to search for possible medium modifications of the elementary amplitude.