Just FYI for people (like me) who didn't know this already:
After upgrading from KDE 3.1 to 3.2, I found that the mouse would very often not work when clicking on panel buttons, K menu items, virtual desktop switcher, etc. I would usually have to use ALT+TAB to get the menus to go away, and then start again. After pouring through kde's bugzilla database I finally found the answer!
The solution is to remove the klipper applet from the panel!
Mitch, thank you for that :) The problem was most annoying and I'm delighted to be rid of it.
JDL