Have you ungraded to KDE 3.2.1? The login manager in KDE3.2 is all new & so far not configurable. see KDE bug report 75882 (http://bugs.kde.org/show_bug.cgi?id=75882).
I successfully upgaded Mandrake to KDE3.2.0 but when I tried to upgrade Morphix to KDE3.2.1 I had basically the same problem you have. I was able to get logged in but as root only & then I couldn't log out...it would just keep trying to re-login at the graphical login. Maybe the KDE3.2.1 deb package is no good.
I ended up chucking Morphix (it wasn't working out anyway), installed Knoppix 3.3 instead but I haven't attacked it enough to break it (yet).