I have been looking for some time but have not found anywhere near sufficient documentation / examples on how to use the CryptoAPI that comes with linux in the creation of syscalls / in kernel land.
If anyone knows of a good source please let me know, I would like to know how to do SHA1 / MD5 and Blowfish / AES within the kernel space only.
The best place to start is Documentation/crytpo in the kernel sources. dm-crypt is one of the many components that probably uses the kernel crypto API and you can refer to it to get an idea about usage.
There are a couple of places in the kernel which use the crypto module: the eCryptfs file system (linux/fs/ecryptfs/) and the 802.11 wireless stack (linux/drivers/staging/rtl8187se/ieee80211/). Both of these use AES, but you may be able to extrapolate what you find there to MD5.