KDE 3.5.x really was peak desktop at the time, especially when all the K* apps were working as intended. As a Windows user discovering Slackware 10.2 back 2005, I was really blown away. KDE 4 just didn't feel the same.
One thing in watching the 30 years of KDE talk is the DE-emphasis on apps. The whole thing got to big so it went from SC4 or whaetver into different strains. Modularized, etc. About then serious desktop apps seemed to have died off too
I guess one cares less about DE's when my DE is a front for a terminal and a VM (my browser).
It's sad to see sidelining of KOffice, Konqueror (of course still exists), Amarok and other great apps.
A desktop environemnt is not just a WM + Panel + Decorations.
KDE3.5x has is own... well everything tied together.