He can be in KL if you want, for more opportunities for interaction! Asha's there, because she was just on a mission up North to see if that rebel king was telling the truth about the dead who walk. You could have Theon either go on that mission with her or be waiting for her when she gets back. I've implied, in my Tyrion thread with Asha, that at least a portion of the Iron Fleet is protecting King's Landing at the moment, so it'd make sense for Theon to be around.