Does the local memory usage increase with banking and coalescing?

The number of M20K blocks used indeed depends on the number and width of accesses to the local buffer. However, all of this info will be reflected in the report. If the report says the implemented size is 512 bytes but 103 blocks are allocated, these blocks are likely being used in the other parts of the circuit. e.g. as buffers between the kernel and the memory interface, as on-chip cache for global memory accesses, as FIFOs in the pipeline or to implement channels, etc. If you check the "Area analysis by source" part of the area report, you can get a detailed break-down of where each resource is being used. If you post your full kernel code, I can generate the report and give you more details.