Same here, using KDE 4.1.2 (Debian Linux unstable, AMD64).

Little differences in CLI output though:
-----------------------------------------------------
kpackage(16088) KpTreeList::readTreePos: KpTreeList::readTreePos()
kpackage(16088) managementWidget::readPSeparator: managementWidget::readPSeparator()
kpackage(16088) KPKG::setupMenu: kpinterface[DEBt]->makeMenu
kpackage(16088) DEB::makeMenu: DEB::makeMenu
kpackage(16088) kpPty::breakUpCmd:  kpPty::run CMD=" "smart query --installed" " pty =  kpKProcIO(0x1e82f20)
kpackage(16088) kpPty::run: return Result= 0   1512
kpackage(16088) kpPty::breakUpCmd:  kpPty::run CMD=" "/bin/sh -c 'smart info --urls >/home/xavier/.kde4/tmp-ahasverus/smart.list'" " pty =  kpKProcIO(0x1e82f20)
kpackage(16088) kpPty::run: return Result= 0   0
kpackage(16088) packageInfo::fixup: Package  "package"  has no group set.
kpackage(16088) packageInfo::fixup: Package  "http://lists.sourceforge.net/lists/listinfo/hfterm-hackers."  has no group set.

Process killed after running 2 hours. Was eating 99% of cpu.

Running alone, Smart Package Manager works well.

I can confirm this bug, KDE 4.1.4, Debian Lenny (from kde4.debian.net)

kpackage(6071) KpTreeList::readTreePos: KpTreeList::readTreePos()
kpackage(6071) managementWidget::readPSeparator: managementWidget::readPSeparator()
kpackage(6071) KPKG::setupMenu: kpinterface[DEBt]->makeMenu
kpackage(6071) DEB::makeMenu: DEB::makeMenu
kpackage(6071) kpPty::breakUpCmd:  kpPty::run CMD=" "smart query --installed" " pty =  kpKProcIO(0x813c3c0)
kpackage(6071) kpPty::run: return Result= 0   1904
kpackage(6071) kpPty::breakUpCmd:  kpPty::run CMD=" "/bin/sh -c 'smart info --urls >/tmp/kde-eol/smart.list'" " pty =  kpKProcIO(0x813c3c0)
kpackage(6071) kpPty::run: return Result= 0   0

Bug still exists in KDE 4.2.0 from Debian Experimental. KPackage gives same output.

i've uncommented some debug lines and compiled KPackage from KDE svn. In my case, kpackage generates info-file, using 'smart info --urls >/tmp/kde-eol/smart.list', and this file is large (28MB). Then kpackage tries to read&parse it - and do it very slow. When i asked my friend to run 'smart info --urls >testfile; du -h testfile' - it was only 700 KB. So i think it is SMART bug.. Now i'm trying to understand, where did smart get theese 30k packages o_O

Finally - i have compiled latest version of smartpm (1.2) - and all works fine! I had version 1.0 from Debian experimental. Can anyone confirm - is the problem in smartpm or it's just for me?

I'm finally shocked. I've just felt down to smart 1.0 from debian experimental repo, and all still work fine - smart generates 3.4mb-info file(but not 30mb, how it was!), and kpackage parse it only for 4-5 minutes - and then works fine! So maybe try to reinstall smartpm, if you have these bug. 

[12:50 eol:~]$ smart --version
smart 1.0

[12:50 eol:~]$ kpackage
                                                                            
kpackage(18860) KpTreeList::readTreePos: KpTreeList::readTreePos()                                                                          
kpackage(18860) managementWidget::readPSeparator: managementWidget::readPSeparator()                                                        
kpackage(18860) KPKG::setupMenu: kpinterface[DEBt]->makeMenu                                                                                
kpackage(18860) DEB::makeMenu: DEB::makeMenu                                                                                                
kpackage(18860) kpPty::breakUpCmd:  kpPty::run CMD=" "smart query --installed" " pty =  kpKProcIO(0x811da20)                                
kpackage(18860) kpPty::run: return Result= 0   1917                                                                                         
kpackage(18860) kpPty::breakUpCmd:  kpPty::run CMD=" "/bin/sh -c 'smart info --urls >/tmp/kde-eol/smart.list'" " pty =  kpKProcIO(0x811da20)
kpackage(18860) kpPty::run: return Result= 0   0                                                                                            
kpackage(18860) managementWidget::checkMarked: checkMarked()  0   0                                                                         
kpackage(18860) kpPty::startSession: kpPty::startSession
kpackage(18860) kpPty::startSession: kpPty::startSession TRUE
kpackage(18860) kpPty::startSession: privCmd= 1   0   1
kpackage(18860) kpPty::startSu: startSu()
kpackage(18860) kpPty::startSession: Loopst
kpackage(18860) kpPty::readLines: true   "ÐаÑолÑ: "  Match password p
kpackage(18860) kpPty::startSession: Loopfn Result= -2000
kpackage(18860) kpPty::startSession: H= ""  PT= false
kpackage(18860) kpPty::startSession: Passwd= "ÐаÑолÑ: "
kpackage(18860) kpPty::startSession: Loopst
kpackage(18860) kpPty::startSession: Loopfn Result= -1000
kpackage(18860) kpPty::startSession: kpPty::startSession TRUE
kpackage(18860) kpPty::startSession: kpPty::startSession
kpackage(18860) kpPty::startSession: kpPty::startSession Not needed
kpackage(18860) kpPty::run: CMDroot=' "smart update" '
kpackage(18860) kpPty::run:  kpPty::run session

[12:55 eol:~]$ du -h /tmp/kde-eol/smart.list
3,4M    /tmp/kde-eol/smart.list

Oh, i understood. After running 'smart update' smart.list occupies 28MB again. Anyway, in my case it's smartpm bug.

file pkgInterface.cpp, function pkgInterface::collectInfo() parses package information for 1 package from smart list. This debug output

  kDebug() << "!!!!" << key << "," << val << "\n";
  if (key == "name" || key == "package") {
    a.insert("name", val);
    haveName = true;
...

shows, that key is in my system language, not in english! It prints something like: 
...
kpackage(16964) pkgInterface::collectInfo: !!!! "каналы" , "sid - main contrib non-free"          
kpackage(16964) pkgInterface::collectInfo: !!!! "флаги" , "new"                                                                                                                       
kpackage(16964) pkgInterface::collectInfo: !!!! "сводка" , "AOLserver 4 module: module for accessing MySQL databases"          
...             

[10:33 eol:~/projects/other/kdeadmin/kpackage]$ locale
LANG=ru_UA.UTF-8
LANGUAGE=
LC_CTYPE="ru_UA.UTF-8"
LC_NUMERIC="ru_UA.UTF-8"
LC_TIME="ru_UA.UTF-8"
LC_COLLATE="ru_UA.UTF-8"
LC_MONETARY="ru_UA.UTF-8"
LC_MESSAGES="ru_UA.UTF-8"
LC_PAPER="ru_UA.UTF-8"
LC_NAME="ru_UA.UTF-8"
LC_ADDRESS="ru_UA.UTF-8"
LC_TELEPHONE="ru_UA.UTF-8"
LC_MEASUREMENT="ru_UA.UTF-8"
LC_IDENTIFICATION="ru_UA.UTF-8"
LC_ALL=

and if i run 'LANG="en" kpackage' - all works really fast! So maybe you must to run smartpm with modified LANG enviroment variable or add parsing other languages...

you should report this bug to Debian, against smartpm

But it's not smartpm bug - it's because kpackage works only with english smartpm (please see bug #186735, that i've created). This bug really complicated me..

KPackage was recently removed from KDE SC (since 4.4 beta2) as it was completely broken and unmaintained.

Most of the common GNU/Linux distributions offer their own tools to deal with packages, and KDE is working on an universal package manager replacement named "Shaman" (to superseed KPackageKit)

Closing the KPackage's bug reports as UNMAINTAINED.

Regards