The capital of the same-named state, for most Kuala Terengganu is just a hub town as they travel between the island access points at Merang to the north and Marang to the south (for Pulau Redang and Pulau Kapas respectively). If you have time up your sleeve, however, Kuala Terennganu is worth at the very least an overnight stay or for some far longer.
Kuala Terengganu saw a burst of development thanks to oil revenue piling in, and while the couple of towering hotels overlooking the ocean from Jalan Sultan Zainal Abidan may convey an image of industriousness and modernity, at its heart Kuala Terengganu remains a small and decidedly conservative Malaysian town.
Sitting at the mouth of the Terengganu River, where it empties out into the South China Sea, traditional Kuala Terengganu has a small fishing fleet (though the traditional boat building has largely died out) and not surprisingly the seafood here is excellent, especially from the city's good supply of Chinese restaurants. It is also known for handicrafts, and is home to a much underrated National Museum.
We liked Kuala Terengganu as a nice place to hang out. A few days spent on Pulau Duyong watching the river slide by from one of the cheap shacks at Awi's Yellow House then another day or so eating your way around town with a little light sightseeing (don't overdo it) worked for us.
While Merang to the north is the main gateway to Pulau Redang, there is a boat which departs from just to the north of the Central Market in Kuala Terengganu to the main village on the island which departs daily -- year-round. Despite what you may have heard, the village on Redang operates year-round and you may be able to arrange homestay-style accommodation in the village in off-season. You will need to arrange a boat from the village to any of the other beaches and this may be a bit pricey.