Can you explain why you think it should leave the panels?

Sure, the fact that it's left the panels since the feature was introduced way back when is a good reason. If you want a super duper Show Desktop widget, create one, but significantly altering the functionality of the current one is a mistake. Secondly, there's no obvious way to get back to any application running when everything is hidden. What key combination reverses the hiding of everything? I'm not aware of any other situation where the basic means of interfacing with the operating system is removed for a "feature".

I'm sure there are other reasons. What is the logic behind hiding the panels?

I'm tyring trying to help, please avoid being snarky.

So the issue is that there's no obvious way to get back to the running application. 
Especially if your original show desktop button was in the panel. Thanks.

(FYI, pressing escape will bring it back for now)

Apologies for any snarkiness. However, the issue is not that there's no way to get back to the running applications. Pressing escape does not get back the panels on my computer. 

Yes, my original Show Desktop button is in a panel, which probably causes part of the problem/confusion. The main problem is twofold - the changing of original behavior and the inability to get the panel back.

For the first issue, and I'm not trying to be snarky here, I genuinely want to know - what research was done to support the changed behavior? In what way is it considered better behavior? Was there significant negative feedback about the usability of the original feature?

For the second issue, I expected pressing Escape to bring everything back, but it didn't, so that's probably another bug. Which probably moves my first issue into the nature of a Feature Request.

Again, apologies for any snarkiness.

here, https://git.reviewboard.kde.org/r/122679/

I've amended the title of the Bug, since Escape does not restore the panels or active windows. There was a discussion in the review about Krunner being the "life line" for the user, but if the user doesn't use Krunner, then there's no life line. Personally, I use the panels, and particularly the Application menu as my life line. I'll remove the button until an alternative appears.

I didn't see anything in the discussion about Escape restoring panels and windows...

*** Bug 347059 has been marked as a duplicate of this bug. ***

One last thought on this issue. Generally the use of the word Desktop indicates what you see when the computer first boots, this includes the panels (i.e. the phrase "boot to the desktop" would refer to a state where the panels are still visible.) The KDE Visual Design documents (https://community.kde.org/KDE_Visual_Design_Group/Plasma_5_Desktop_Configuration - under Content Structure) also include the panels in the definition of Desktop. Most uses of the term elsewhere on kde.org also include the panels.

So perhaps a widget that hides the panels shouldn't be called "Show Desktop" but rather something else. I'm not sure if the desktop minus the panels has an official or unofficial name.

Can anyone else confirm that hitting Escape does not bring the panels back, or suggest a method of testing why Escape doesn't work on my computer?

Thanks.

Esc doesn't work on my machine as well.

Two days ago before I updated to 5.3.0-1, it just worked. So far, a temporary solution is to assign a keyboard shortcut to get the desktop shown.

Kubuntu 15.04, Plasma 5.3 from kubuntu-ppa/backports.

Same behavior. The widget "Show desktop" hides everything. I think that it definitely should leave at least the main panel with launcher, task manager and notifications.

Esc doesn't work but you can press ALT+TAB, ALT+F2 or assign a shortcut (in Global Keyboard Shortcuts/kwin, e.g. Win+D, Meta+D). When I press it ones everything disappears, press again and everything is back.

*** This bug has been marked as a duplicate of bug 346933 ***