There’s no way to know – it could be interpreted just about any way.
Kate wasn’t a topic of conversation when Sawyer said that, and he wasn’t exactly in the moment. The pronoun could refer to anyone. Hell, he might have been having a fever-dream about a boat he was keen on. Jack assumed he meant Kate, and said so – but there’s no reason to think that reflects on anyone but Jack, who’s viewing things through the filter of his own preoccupations.
Later in that episode, when Kate and Sawyer are together, Sawyer looks right at her and asks “Why did you kill me?” and Kate reacts as though she believes Sawyer has been “possessed” by her wicked stepfather. Again, we can’t make any inferences about how Sawyer feels about anyone in particular from this, his words are more of a rorschach for Kate to respond to, to let us know about her confusion and conflict over the supposed origin of her “bad boy” hang-up.
Nothing’s set in stone, they can take it wherever they want to.
The “truth” game doesn’t tell us anything about the objective truth, only Sawyer’s self-assessment, or how he wishes to portray himself to Kate.
It could be that he really loved Cassidy, and is trying to convince himself that he never did, as a coping mechanism.
Maybe he’s got a spot for Kate that he hasn’t acknowledged to himself.
Since so much of the mechanics of the show depends on the baggage that the losties have brought with them from the past, I tend towards thinking that the relationship between Kate and Sawyer isn’t so much about them as it about psychological transference stemming from their existing unresolved relationship issues. Sawyer is hung up about his feelings for Cassidy, and Kate happens to be the only person around who matches her type. Kate is hung up about her feelings for Wayne, and Sawyer happens to be the only person around who matches his type.
He’s not asking about Kate though, specifically – and he’s totally out of it. He says, “Where is she?” and Jack says “You mean Kate. I sent her out to get some food,” and then Sawyer says “I love her.”
But he’s delirious, and stays delirious for quite some time after that exchange. We don’t know that Sawyer would have said anything different if Jack had responded, “Your grandma? She’s giving Hurley some reverse-cowgirl action out on the golf course.”
Jack assumed that he meant Kate because Kate had been looking after him – but that entire time, he was completely unresponsive, and probably had no idea that Kate was tending to him.