Can I apply the "Hong Kong Special Administrative Region People's Republic Of China" passport in KL?

Once you have BNO passport, you have it for life unless you actively renounce it. That is to say if you are not a HK Permanent Resident or apply for Chinese Naturalisation as a Chinese National, your application will probably be rejected. But if you are a BNO passport holder of Chinese descent, you can try to submit your application for HK SAR passport to CHinese embassy in Malaysia. According to my knowledge, it is better if you apply directly from HK SAR Immigration Department.