Version:            (using KDE 4.3.0)
Installed from:    Ubuntu Packages

Currently the taskbar offers some means to conserve pixel real-estate by grouping multiple windows associated with one application to a single entry in the GUI. This kind of feature is especially valuable when you have "limited pixel real-estate", for instance on a 1280x800 laptop screen.

This works, but when you have (at least in my case) 3 or more applications open without configuring the Taskbar to force (at least) 2 rows you have then already spent all room available. This isn't an issue in itself because with any model sooner or later you will run into that problem: the problem is that you want (at least I do) both an attractive looking & easy to use (no small icky stripes, but "real objects" to click) desktop (which on a 1280x800 screen makes it hard to get a decent 2-row taskbar) but from time to time you want to run a lot of different apps alongside each other and then you want to adjust your taskbar. Unless you do a good amount of advance planning you simply end up finding yourself out of options: the taskbar would be fully occupied so you cannot adjust things "as needed" by the time you realize that.

I can see not all people will run anywhere near the amount of applications to make ALT+TAB window switching an unfeasible option, but on the other hand I know that I myself have nearly always (a) Browser, (b) Text editor of sorts, (c) Terminal running. 

Then when it becomes more interesting I tend to have (d) more browser windows [building a website and testing on multiple browsers for instance], (e) another text editor (IDE or simpler form depending on (b)), (f) more terminals, (g) file managers (usually more than 1 especially if external devices come into play), (h) a note, (i) a calculator, (j) graphics tools, (k) pdf viewers. (Not neccesarily all at the same time, but my taskbar is far from empty.)

It can become pretty messy on a 1280x800 screen. I tend to delegate a few windows to "dump" virtual desktops when it gets too much, but for me at least turning off showing their corresponding entries in the taskbar would mean winding up forgetting about them when I shutdown or log out or whatever (I tried it, I wound up forgetting).

What really would work for me then is a taskbar I could configure to *only* show program icons. At roughly 24x24 even on a 1280x800 screen you can still dump about 15-20 such icons in a single row. This is a more attractive solution than just wrestling with controls because 
(a) The icons would be more or less static in shape and size, which is aesthetically pleasing [consistency]
(b) Out of (a) follows that you have a more clearly defined (because consistent and after a while anticipated) target to click on (misclicking the entry on a cluttered taskbar is all too easy)
(c) Out of (a) follows that the icons in themselves would look better because not resizing means not loosing display quality
(d) Icons are unique for most/all applications and should therefore be as distinctive as the full application name
(e) Combined with grouping applications per icon you get a more space efficient taskbar without reducing individual items to tiny proportions.

Of course I realize this option may not be suitable for everyone. It should not be the default.

Also it is worth noting that a very similar feature has been implemented for widgets a long time now: System Settings offers you the option to show "Text Only", "Icons Only", "Text under Icons" and "Text Alongside Icons" in toolbars already.