Proper way of handling threads in kernel?

One of the "right" ways to do this is to have your thread function check if it kthread_should_stop, and simply return if it does need to stop.

You don't need to call do_exit, and if you intend to kthread_stop it from the module exit function, you probably shouldn't.

You can see this by looking at the documentation for kthread_create_on_node in kernel/kthread.c (extract from Linux kernel 3.3.1):

/**
* kthread_create_on_node - create a kthread.
* @threadfn: the function to run until signal_pending(current).
* @data: data ptr for @threadfn.
* @node: memory node number.
* @namefmt: printf-style name for the thread.
*
* Description: This helper function creates and names a kernel
* thread. The thread will be stopped: use wake_up_process() to start
* it. See also kthread_run().
*
* If thread is going to be bound on a particular cpu, give its node
* in @node, to get NUMA affinity for kthread stack, or else give -1.
* When woken, the thread will run @threadfn() with @data as its
* argument. @threadfn() can either call do_exit() directly if it is a
* standalone thread for which no one will call kthread_stop(), or
* return when 'kthread_should_stop()' is true (which means
* kthread_stop() has been called). The return value should be zero
* or a negative error number; it will be passed to kthread_stop().
*
* Returns a task_struct or ERR_PTR(-ENOMEM).
*/

A "matching" comment is present for kthread_stop:

If threadfn() may call do_exit() itself, the caller must ensure task_struct can't go away.

(And I'm not sure how you do that - probably holding on to the struct_task with a get_task_struct.)

If you walk the path of a thread creation you'll get something like:

kthread_create                                           // macro in kthread.h  -> kthread_create_on_node                              // in kthead.c    -> adds your thread request to kthread_create_list    -> wakes up the kthreadd_task

kthreadd_task is set up in init/main.c in reset_init. It runs the kthreadd function (from kthread.c)

kthreadd                                                 // all in kthread.c  -> create_kthread    -> kernel_thread(kthread, your_kthread_create_info, ...)

And the kthread function itself does:

kthread  -> initialization stuff  -> schedule() // allows you to cancel the thread before it's actually started  -> if (!should_stop)    -> ret = your_thread_function()  -> do_exit(ret)

... So if your_thread_function simply returns, do_exit will be called with its return value. No need to do it yourself.