First, check that /opt/kde3/share/config/kdm/Xsession will start up your kde desktop (when typed at the xterm window you are getting).
You need the 'session type' as the first paramater when trying this. E.G.:
/opt/kde3/share/config/kdm/Xsession kde
The 'session type' must be correct -- it must be what is listed in the login widget.
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