kdelibs 3.4.2-5 from testing no longer uses applications.menu for the menu specification, but uses kde-applications.menu now instead. This has been done to get a better compatibility with GNOME and allows us to remove the hack in startkde to make sure KDE is first in XDG_DATA_DIRS (with this version of kdelibs, this doesn't matter anymore)
Because of the move from applications.menu to kde-applications.menu, all files in /opt/kde/etc/xdg/menus/applications-merged have to be moved to /opt/kde/etc/xdg/menus/kde-applications-merged. This will be done in the next kdebase release. Until this package is released, at least the settings menu is broken if you don't fix this by hand.