I think this happens if you use kdm/xdm with a xfree server compiled from cvs dri (as it lacks xauth). You should be able to disable xauth with xdm (iirc with kdm too), but I really can't remember how - I'll just use console login instead...
That was too fast. Just put "AuthNames=MIT-MAGIC-COOKIE-1" under [X-*-Core] into /etc/opt/kde3/share/config/kdm/kdmrc (that's at least where the file is here with a heavily patched suse 8.1), which will disable the xdmauth stuff (finally got my kdm back!). Though this might make your system less secure ;-)
Roland
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