After shredding my tire on my Kurt Kinetic I picked up one of the indoor training wheels. After my first ride, my back, bike, and floor were covered in orange rubber - do I have the tension of my trainer too tight or is this normal?
The tension is correct when the wheel no longer slips when you test it by hand.
In other words, tighten the 2 1/2 turns or so as they suggest and then test with your hands - spin the wheel forward a few inches, and then jerk it back, to see if it slips against the drum.
Tighten additionally until it slips no more.
I have the same setup and that is not normal for me. I make sure that the tire is properly inflated (@100psi) before every ride. Then, I tighten until the roller touches the tires and give it 3 or 4 more quarter turns. The roller presses a little into the tire, but not very much. I usually go with least tension that has a good contact and doesn’t bounce.
I used that setup frequently all last year and haven’t seen any orange shavings. I recently replaced the tire because it had developed a couple bumps that caused the roller to bounce.
After shredding my tire on my Kurt Kinetic I picked up one of the indoor training wheels. After my first ride, my back, bike, and floor were covered in orange rubber - do I have the tension of my trainer too tight or is this normal?
That’s not normal. You’re just putting out too much torque. 
You have too little tension, not too much. The tire wear is coming as the tire slips (think skids) against the drum.
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Correct!
Get one of these and never worry about any of that again:
http://www.probikekit.com/display.php?code=Y2007
you can crank the tension on that tire as much as you are physically able and nothing will come off that tire.
If your tire is shredding, it is because the tire is slipping. Its too loose, not too tight. Crank away, your tire should have a bit of a dent in it. Keeping the air pressure consistant is important too. If you get it right today, tomorrow it will be slipping again if you don’t pump back up. You can’t skip the pre ride pump up just because you are indoors.
I use the Conti UltraSport Home Trainer tire with my CycleOps Fluid2 trainer. And I have an old wheelset that I use specifically for the trainer.
I CRANK the tension all the way - completely tight. And I have the Psi set at 120.
After more than 2 year of this punishment, the tire, wheel and trainer are still in great shape.