How do you usually launch xterm? Here are a couple of suggestions: from the command line you can launch a new xterm with /home/user/documents as working directory by issuing
xterm -hold -e "cd $HOME/documents && /bin/bash" &
moreover you can put this code in a shell function and have a shortcut command at hand.
If using the KDE menu you can try to edit the properties of the xterm launcher. In KDE 3.5 I have a text box called "Work path". I can choose any valid path and every time I start a new xterm, it will open in the specified directory instead of home.