Let's see C1: it is mounted on the switch, in parallel to the switch contacts. It is used to suppress arc forming (at turn on/off) between the contacts, therefore to preserve the switch. An X2 film cap is fine here, in case it fails short the switch will simply not work. I would not use a ceramic type here, simply because ceramics are not self healing, like PP are.
C2: this cap is connected in parallel to neutral and hot, and it's purpose is to filter RFI. X2 type is right here, film type as above. I would change it in your KA7100.
Y2 caps are more stringent in specs, mainly they support higher spikes voltages, compared to X2: you can use Y2, if you like.
Some caps are rated both X/Y, since Y type is superior in specs to X.
Now about when it fails, it short or open? From my experience, an X type caps can fail short: it simply made the main fuse to blow. Since it's connected between neutral and hot, no danger to touch the chassis. Y type? I don't know, I never found it out: I think it can fail short or open, like the X, but has higher specs to not fail. If you know more, please share with us.