I had used KDE3 for about 1-2 years, when KDE4 appeared. No question, 4.0 was impossible to use, and 4.1 was painful (my experience is with kubuntu). However, the breakeven for me was with KDE 4.2, when I thought this was a product at least as good as KDE3. Yes, there were features in KDE3 that KDE4 was missing, but there were also loads of new features, concepts and functionality in 4.2 that 3.5 couldn't do. I also always found 3.5 quite ugly.
I totally disagree with your notion of "digging the hole deeper". As much as things got better from 4.0 to 4.1 to 4.2 (in my opinion), they just continued on that trajectory to making 4.3 way better than 3.5. Now, I have been using KDE 4.4 betas for at least a month (in a production environment -- call me stupid, but I am just amazed about KDE4), and I am still thrilled how much better and nicer it got! Hell, I am even using the "crappy" kubuntu distro everyone is yelling at. OK, call me a fanboy. But you should know that I also seriously tried GNOME, and LXDE, and Xfce, and even IceWM -- I all didn't like them and went back to KDE4.
Maybe, it is just that you were so used to KDE3 and so good at it and so happy, that there was no way of matching your productivity with something as new and innovative as KDE4? I think KDE4 is going into a new, exciting direction, and that it will pay off that they did everything from scratch at some point. Similarly, Linux sucks for so many people who have been conditioned to using Windows, that they don't get anything accomplished in a different environment. Could that be some of the reason for your disappointment (along with your anger)?