Version:            (using KDE 4.2.0)
OS:                Linux
Installed from:    SuSE RPMs

I posted this question to the support list serv.
Scott Pancoast wrote:
I upgraded to KDE4.2. from 3.5.

When I upgraded I lost all of my desktop icons. Ok, that happens. 
Nothing big.  So I went through the application menu, and added my 
favorite desktop Icon's/links back onto my desktop,
 
You dragged menu icons to the DeskTop?  Which would mean that you have 
the FolderView selected for your Desktop.

and to the panel using the provided right click option.

This is where everything took a hard turn left.

I worked with the programs used on the desktop for a while then shut  
down, so I know the links worked. When I restarted my computer, the  
ICONs/links were now the basic Binary file Icon and a non-functional  
link. The Icon looked like a page with the corner turned down filled
with stylized 1's and 0's.   The same thing occurred with several of
my panel Icons.

I guessed I used kde3 icons / programs.  So I deleted the now defunct  
icons and reset/set new ones, using only kde4 icons if possible.
Shut down and restarted.

Now, I get the old defunct Icons, and the new icons.

So, I tried to reproduce your problem and couldn't.

I don't really know what the problem might be.

*****************************************************

Another person responded to the above posting on the list serv

Date: Sun, 15 Feb 2009 18:59:06 -0700
From: James Richard Tyrer <tyrerj@acm.org>
Subject: Re: [kde] Desktop and Panel links and icon's missing. What do
	I do?

 
What I can tell you is that the stuff on the DeskTop is actually in a
folder: "$HOME/Desktop" is the default.  So, you can go to that folder 
and delete the 'desktop' files that are screwed up.
 
I have reproduced part of your problem, so if you can confirm this, report a bug and I will confirm it:

Unlock Widgets
Add Panel
Drag "Terminal" from menu to new panel.
Lock Widgets
Leave Logout
Log back in to the KDE-4 session.
Check to see that the icon works.
Unlock Widgets
Remove the Icon
Note that the icon does disappear!
Lock Widgets
Leave Logout
Log back in to the KDE-4 session.
Note that the icon is back, but that it is now the binary file icon.
--
JRT