Marine macroalgae have emerged as promising third-generation biomass resources for sustainable biofuel production because of their rapid growth, noncompetition with arable land, and high productivity. Among them, Kappaphycus alvarezii, a red macroalgae widely cultivated for carrageenan extraction, presents significant potential for bio-oil production within an integrated biorefinery framework. However, its intrinsic characteristics, particularly high ash content (15–35 wt%), abundant alkali and alkaline earth metals (AAEMs), and sulfur-rich polysaccharides, give major challenges during thermochemical conversion. They often result in low-quality, oxygen-rich, and unstable bio-oil. Demineralization pre-treatment has been reported to substantially reduce ash content and AAEM concentrations, with acid washing and water leaching achieving ash reductions of approximately 30–80% depending on treatment conditions. Such mineral removal suppresses secondary cracking reactions and promotes improved bio-oil formation, leading to increases in bio-oil yield by 10–25 wt% and a reduction in oxygenated compounds, along with improved stability and higher hydrocarbon selectivity. This review critically evaluates demineralization strategies applied to K. alvarezii and examines their influence on catalytic upgrading for high-quality bio-oil production. Special emphasis is placed on carbon-based catalysts originating from biochar, which provide benefits in terms of cost, adaptability, and alignment with closed-loop biorefinery models. The present review consolidates major analytical techniques, namely, ICP-OES, FTIR, and GC–MS, are critical for connecting demineralization efficiency, catalytic performance, and bio-oil composition. This study integrates pretreatment, catalytic design and characterization perspectives to identify significant knowledge gaps and proposes future research objectives focused on enhancing bio-oil quality, process sustainability, and the circular usage of macroalgae biomass, particularly K. alvarezii.