I’m still using OS X 10.11, but I know many 10.12 users have been waiting for Karabiner to be capable of providing Hyper Key support. For those unaware, Hyper Key refers to the user pressing Caps Lock as an equivalent of pressing Shift-Command-Option-Control as a modifier key.
The wait is over. Instructions for setting this up in 10.12 macOS Sierra are available here:
Thank you thank you thank you thank you thank you thank you thank you thank you for posting this update – I have been waiting for this for months!!!
It is nice the have the Hyper Key back. I do notice that the USB Device Key trigger can no longer get any events for the keyboard if Karabiner Elements is installed. It can still get events from other devices (like the Mouse or an XK-24). But the keyboard is no longer visible to the Keyboard Maestro USB HID system at all.
I don’t know if this will help the issue @peternlewis described, but Brett Terpstra has a thorough rundown on getting the Hyper Key back with Karabiner.
Update for High Sierra
Trying this and Brett Terpstra's solutions months later on High Sierra as well as using imported complex modifications and have been running into the same issue: My escape key stops functioning without holding fn.
I can't hit escape or caps lock to dismiss dialogs and the MacOS keyboard viewer doesn't register and escape as happening unless I hold fn.
However KM does register the escape. Therefore, the work around that has worked for me so far is simply to create a macro that triggers on escape and types escape keystroke.
Note that it is not well defines what will happen when you simulate a keystroke that is also a hot key, like you do here. The key may go through to the application, or it may re-trigger the macro. The result of the latter with a macro like this tends to be a delay in the action of the Escape as Keyboard Maestro executes the macro dozens of times before the key sneaks through. But it depends very much on the performance of the Mac, the version of Keyboard Maestro and OS X, and the load on the Mac.