Success!

I followed all your pointers and I have now have a nice KDE 3.2.1 desktop :)

- I cleared up the locales mess - glad (?) to hear that it's a bug and not just my incompetence ;)
- I continued 'dpkg --configure -a'-ing and 'apt-get -u -t unstable dist-upgrade'-ing (and probably other things mentioned here), had a crash, rebooted a once or twice, used debconf (or was it just 'dpkg --configure -a' that launched debconf?) accepted new config files for X (and kdm?) etc etc and eventually everything came together :)

So the secret is have someone there to help you along (thanks Stephen), keep the faith (even if you find yourself losing window managers on the way), and just keep going at it.

Impressed with KDE 3.2, it's a very strong contender for my desktop/wm of choice (although I was surprised at how much I liked fluxbox; IceWM is the other one I appreciate). Just one particularly annoying bug though - Desktop Sharing does not work :( I've added to the bug report at the KDE site.

Now just back to waiting for Knoppix 3.4 CeBIT (I want a 2.6 kernel, and it's impossible for me to do a manual upgrade).