The literal meaning is indeed potassium apparatus / device / contraption. The Kali part is indeed shortened from Kaliumhydroxid.

Strangely enough, the modern German name is Fünf-Kugel-Apparat, "five balls apparatus". I found that one simply by going through "Other languages" on Wikipedia.

And benzene is called Benzol in German. And gasoline is called Benzin - that word has false friend potential because it seems more similar to benzene. It is also not derived from the name of Carl Benz of Mercedes-Benz fame who used it in the first practical automobile that he invented.