When you're in KDM with your user selected and open the menu, what session does it want to load? It should be a KDE 3.x (with x the minor version you've installed). Are the desktop files in $KDEDIR/share/apps/kdm/sessions correct, in particular the KDE desktop files?
Do you see any error message? Or are there useful error messages in ~/.xsession-errors ?
A lot of questions, I know