Version:            (using KDE 4.4.0)
Compiler:          gcc-4.4.3 
OS:                Linux
Installed from:    Fedora RPMs

Processes started during KDE start-up, and processes started from the kickoff panel and krunner, have an initial working directory of ~/Documents, not $HOME.

I'm using KDE 4.4.0 on Fedora 12, unmodified.

How to demonstrate: /usr/bin/lsof | grep /Documents  

The list of such processes from KDE start-up includes klauncher kded4 gam_server kglobalaccel knotify4 krunner abrt-applet kmix klipper. Of course, the cwd of these processes may not itself be of concern where it does not affect the user, but could just be regarded as a curiosity. 

What is a concern and is confusing to users is that this ~/Documents initial working directory also applies to applications started from kicker: for example, Terminal, lxterminal, gnome-terminal, Thunar File Manager, xarchiver, and many more. And processes started from krunner.

Interestingly (with my distro Fedora 12) the problem doesn't apply to konsole and Dolphin, so I must assume that they have been individually "fixed". In fact konsole now sets its initial current directory to $HOME, even when started in a different working directory from another konsole. (In KDE 3, konsole preserved the current directory it was invoked from).

This behaviour can be circumvented and $HOME can be made the default start-up directory for applications started from kickoff by setting the "Documents path" to $HOME in KDE System-Settings, About Me, Paths: this has an immediate effect on newly started applications. But this should not be necessary, is not intuitive, and defeats the object of having a "Documents path", which is just one of seven paths defined on that page. "Documents path" ought to lead to a directory which only contains Documents, just as the "Music path" leads to a directory for music files.

In case it be thought that this is a "feature" and not a bug, perhaps the KDE documentation team should document the idea that $HOME/Documents is the most important path in a user system, worthy of being the default! Most people would say it was $HOME :-) 

Also: I'd be interested in the scope of this issue: Fedora 12 only, or all distros with KDE 4.3/4.4.