Version:            (using KDE 4.2.2)
Installed from:    Compiled From Sources

Editing a menu entry will cause it to forget the icon during the intial edit. (The one which copies the .desktop file to the per-user overlay)

This is both counter-intuitive and extremely unhelpful since, in my experience, the usual reason for editing a .desktop file is to PRESERVE the choice of icon (without having to dig through /usr to find it) while doing something like:
- making a small correction to a description field
- switching from a /usr/bin file to a /usr/local/bin wrapper script
- adding some command-line arguments (eg. --enqueue to Audacious Media Player or "-p webdev -no-remote" to Firefox to get multiple simultaneous profiles)