I've had a lot of trouble with my dual screen setup with Kubuntu 11.10. It works like a dream when you set up it at first. The trouble starts when you turn off either or both of the monitors and then turn them on. KDE is "intelligent" so that it tries to switch between the single and dual display set up depending on what displays are on. Unfortunately, the result is rather uncontrolled and random.
So, this morning I arrived at work and opened my laptop first...MISTAKE! I should have turned on the external monitor instead. So, it did not just not work, but also got completely stuck. So, I restarted kdm from console screen. After that, the behavior got really odd. No windows were visible. I could see them in the task panel, but they were nowhere. Then, I switched to the 3D cube view and I could see them - behind the background!
So, apparently the background is no longer a "root image" in X, but a window itself, and it has a Z index. I was able to bring the windows forth by right-clicking them in the task bar and selecting "Advanced -> Keep Above Others". But that was rather nasty thing to do. Then occasionally, the panel itself would drop below the background image and using the machine became impossible. Even restarting the machine did not help, apparently the Z index of the background was saved in system configuration. Great.
I traced the problem to .kde/share/config/plasma-desktop-appletsrc. Apparently, the background is managed as a desktop applet (aka "desktop widget") and each has a zvalue parameter defined in the configuration.
I did not trace the issue further, just removed the file. Apparently others have met the same issue, hence this post.