This is how to fix it, courtesy of someone else. Works for me. I also found
and edited /etc/pam.d/kdm-np
---8<---snip-----------------
Yes, when the package libpam-umask appeared in the repository.
After installation, you add a line in your /etc/pam.d/{xkg}dm file :
session optional pam_umask.so umask=002
or whatever your umask must be.