I'm new to linux, I just got Slackware 10 installed with KDE. I've seen some screen shots where the console has just been in the backround on the desktop, but all you see is the text to it. How is this done?

Also, is there anyway to make the bars on the top of windows in KDE smaller?

There are quite a few ways, I think one of the easiest would be to use aterm or eterm, both can be found at http://freshmeat.net and then you'll have to mess with them quite a bit, but should be fun learning. Another possibility is someone using things like root-tail, which display certain text files on the desktop, but are completely uneditable from that view, it's simply a readable background...

As for making things smaller, how about a bigger resolution? There are SOOO many ways to customize KDE, plug around the control center, there's bound to be a way...

Cool

Konsole

Settings > Schema

KDE should have a Control Centre where Look and Feel is one of the entries.
Look for Window Decorations, most themes don't allow for title bar resizing but there are plenty of themes about (http://www.kde-look.org).

Once you have Eterm, just run it like so:
Eterm --trans
Konsole has a transparency setting but it's not so good as the background just gets painted onto the konsole whenever you move the mouse then release. Eterm's one repaints itself while its moving.

Eterm transparency can also be toggled on and off and saved as default profile on the Eterm tool bar.