"KDE has no working version."
3.5 is still out there and used by millions.
"How do I make the panel thinner vertically?"
in 4.1 is was rather "hidden": there's a little strip at the top of the panel controller (right click on the panel -> Panel Settings, or click the toolbox button on the far right of the panel) that you can click and drag on. in 4.2 there's a nice obvious button that says "Height" (or "Width" if it's a vertical panel)
" How do I adjust its translucency"
select a Plasma theme that provides a translucent panel, which the default theme does. it requires compositing (aka "desktop effects") to be working, however.
the fake translucency in kicker was an insane hack (trust me, i did the bulk of the coding to get it to work ;) and it of course wasn't perfect: it only showed your wallpaper, not windows and heaven forbid if the wallpaper was animated or anything like that.
"-- how do I give it a completely transparent background, but solid foreground?:"
use a completely transparent SVG. =) in 4.2 there is a control panel in system settings (in the Advanced area) that lets you mix and match individual SVGs should you wish to.
"Yet the KDE4 version of AmaroK doesn't yet support encoding scripts in any way, so my choice is mp3s, or no encoding at all. WTF?"
yes, there are some features missing in the first "dot-oh" release of Amarok2. there's an Amarok release coming in January that covers a lot of these (rather amazing how fast that goes, really), though i don't know if this is one of them. i do hope you've filed a feature request on bugs.kde.org.
oh, and if you're tempted to say "they should have just held 2.0 until January, then", don't bother: making releases from the code repository is an absolutely requirement to keep open source projects moving, and one of the downsides of that is that often a first release of a new series isn't what a consumer-grade user is going to what to cut their teeth on. that's why there is another step in row, e.g. distributions. not that they seem to always be doing their users the best favours lately in that regard. *shrug*