If you have two clients that set the _NET_WM_WINDOW_TYPE to _NET_WM_WINDOW_TYPE_DESKTOP, then KWin does really bizarre things and gets confused, specifically it puts a giant gray window on top of your screen. If you look at the code in workspace.cpp it looks like the code does not anticipate this situation. Bug discovered with a version of Nautilus I haven't put in the tree yet that sets _NET_WM_WINDOW_TYPE. I'll try to build it soon. Running kdesktop twice may also trigger it, I don't know. (BTW, if I get Nautilus running under KDE, then try to run kdesktop, kdesktop just dies with some error about nonexistent signals/slots or something. So I haven't tested what happens if Nautilus is the first desktop window and kdesktop the second.) I made Nautilus set the desktop hint to try to avoid problems if users choose it from the menu, since without the hint Nautilus covers up your whole KDE desktop. My thought was that at least Nautilus would be below the KDE panel. This would help fix a should-fix bug about launching Nautilus in KDE.
We (Red Hat) should really try to fix this before next release.
it seems it's fixed in rawhide with KDE 3.3.0 and nautilus-2.8.0