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If two states have a reciprocal agreement and an individual lives in one of those states and works in the other, the individual will only be subject to the income tax in the state where he lives. So if you live in Indiana or Ohio then you would need to file the following form so no tax was withheld in KY:http://revenue.ky.gov/NR/rdonlyres/B4282E1B-D5FA-4B5F-90DB-33F7952DE974/0/42a809.pdf
You see KY has a reciprocal agreement with both the states so if you choose to live in either of those instead of KY you will just be taxed in your resident state. This does not mean that your company will withhold for your resident state automatically so you need to check with them to see if they will withhold.
The county tax rates change for many counties at end of 2011 so here so here is a link to the explanation on the different counties. You can look up your county.
Yes, you would should pay income tax to Indiana if you lived there and worked in KY.