I, too, confirm this issue. I had to patch and build all of kdebase in order to be able to log into my workstation again. Not a nice experience. For what it's worth, the patch contributed by Paul Brook doesn't apply directly because the bug is actually in a file added through a Debian- specific patch (debian/patches/70_kdm_consolekit.diff). I adjusted the patch so that it can be directly applied to an unpacked source package.
diff -ruN kdebase-3.5.8.dfsg.1.orig/debian/patches/70_kdm_consolekit.diff kdebase-3.5.8.dfsg.1/debian/patches/70_kdm_consolekit.diff
--- kdebase-3.5.8.dfsg.1.orig/debian/patches/70_kdm_consolekit.diff 2008-02-18 10:25:33.000000000 +0000
+++ kdebase-3.5.8.dfsg.1/debian/patches/70_kdm_consolekit.diff 2008-02-18 10:33:53.643810003 +0000
@@ -637,7 +637,7 @@
+ add_param_string (&iter_struct, "x11-display", d->name);
+ add_param_boolean (&iter_struct, "is-local", ((d->displayType & d_location) == dLocal));
+#ifdef XDMCP
-+ if ((d->displayType & d_location) != dLocal) {
++ if ((d->displayType & d_location) != dLocal && d->remoteHost) {
+ add_param_string (&iter_struct, "remote-host-name", d->remoteHost);
+ }
+#endif
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