I just did the first major update in several weeks, and went from KDE 4.4 to 4.6.2.

While it has a nice new splash screen, that splash screen has replaced the background for my first virtual desktop, including removing all the icons I had on it. Not happy.

In addition, when I tried to add the icons back, they went on the wrong desktop. I had #1 displayed and they went on #2.

The activities syb-system changed a lot lately, so you probably have to rework your activities and per-desktop widgets for the new version from the ground. That's probably what you are experiencing. In any case, if you've been a kde user for a long time you should already know that configuration settings from versions that are that different will often not be compatible.

If you want the same widget set in all the desktops you probably should remove all the activities and uncheck the checkbox for different widgets on each virtual desktop, in the virtual desktop settings dialog.

Thanks.

I have different widgets and backgrounds on each desktop.
Only the background and widgets on desktop #1 were affected.

One other change that is very noticeable is that when changing desktops, I get a blank blue screen for about a second before my wallpaper and widgets appear.

Another problem I've just encountered, is that when I log into the second account on my machine, or a new third account, the KDE desktop is scrambled and quite unusable.

Can you see something in the logs? If you use kdm or a similar thing you should be able to find something on ~/.xsession-errors