There are quite many threads (or rants, to be precise) all over the Internet relating to kwallet "overriding your kmail passwords" and "preventing you from permanently saving them". After much trial and terror and gnashing of teeth, I finally came to the solution on my own (never found one online that worked for me) and thought I might share it with all you KDE/kmail/kwallet LXers out there. Well, what did it for me (on OpenSuSE 11.0 and KDE3.5.9), was:

1. clicking on the kwallet icon in the system tray to open the kwalletmanager window.
2. in the kwalletmanager window, clicking on kdewallet.
3. when it opens up, right-clicking on the line relating to kmail and selecting delete, making sure all references to kmail are deleted, but leaving other Form Data and Passwords as they were.
4. closing the kwalletmanager window.
5. right-clicking the kwallet icon in the system tray to open its menu, and selecting Kwallet settings or whatever it's called in your language.
6. selecting the tab Access Control in the dialog box that opens up.
7. ticking the checkbox "Notify me when a program tries to access an open wallet" to enable it, and applying that by clicking Apply or OK.
8. logging out and in again, or rebooting or the like. Depending on your system configuration, this step may be redundant.
9. now when you open kmail, kwallet will ask you if it should access kmail and manage its passwords - just click on Never.
10. when you try to access your email accounts, kwallet will finally stop bugging you. Instead, kmail will ask you to fill in your passwords. Do that for every e-mail account you have and Save it, making sure to also tick (enable) the checkbox Remember my password.

That's it. Now, kmail will check your mails without relying on kwallet, and will retain your mail account passwords over reboots, which, as you may well know, wasn't the case before. Kwallet will still manage your internet forms, passwords and so on, but will never bother you again with your kmail passwords.
Now, as a sidenote, if you go check the Access control tab referred to in step 6, you'll notice a new entry for your kdewallet listed there. By clicking on it, you may explore your current kdewallet access policy.
On yet another sidenote, by right-clicking on the kdewallet icon in kdewalletmanager referred to in step 2, you'll see there's a menu option to "unmount" your browser (and potentially other programs): although I haven't explored it further, that may well be an alternate, or perhaps temporary, method for stopping kdewallet from interfering with specific programs.
On yet another note: you must be aware that passwords saved this way get saved in the kmail configuration file, and that, although saved in an encrypted form, they may not be as inherently secure as with kdewallet.
And on a less optimistic note: whenever you run kmail without first starting kdewallet, kdewallet simply defeats its own purpose by and large. To be more specific: if you disable kmail password checking as per the 10 steps above but no open kdewallet is currently running, kmail will default to the most stupid and obnoxious behaviour imaginable: it will prompt you for your mail account(s) password(s), utterly disregarding the fact that they're already present in its own config file, and -- hear hear!! -- will then proceed to actually delete some of your kmail accounts if you dismiss the dialog instead of entering the password! It seems that, in order to honour your password settings, kmail must have an open kdewallet to refer to, or it will quite simply go berserk. If your mail account is a POP3 account, this behaviour may be due to an empty or incorrect POP3 hostname in your account settings, so double-check that!

Any input and further insights very welcome.

Interesting post.

I hated kwallet and just removed it

I can understand the principle but:

If you are going to rely on kwallet to remember your passwords, YOU will forget them.

So when you reinstall, or try another distro, you are stuck.

So you write your passwords down somewhere. This is a BAD thing to do. There's no point in using kwallet's wonderful encryption(?) if you then write your passwords on a yellow note that's stuck to your monitor.

WARNING off-topic: [
RANT]
It's like the "mobile-phone generation" - nobody can remember their mother's telephone number, unless they have their mobile to hand and can click "Address Book -> Names -> Mother".

My work requires me to remember about 70 (at last count) passwords / 6-digit keycodes.
Some of these I have to change at six week intervals, and some at four week intervals "To improve security". It is driving me mad,, and I am sure most colleagues are choosing stupid passwords because it is driving them mad too.
This isn't "improving" security as they insist, it is making it much worse.

Three months ago they gave me a "Chip & PIN & Photo ID" card. I had to arrange an appointment with "security" within the next 10 days to do this or ...[Something BAD would hapen to me]. I did it. It must have cost them a lot, and I had to produce my passport, utility bills, birth certificate and all.

It still doesn't work, anywhere, and by now I have forgotten my PIN, so it won't ever work.

[/RANT]

Can anybody guess, in broad terms please, my employer? Hint: My profile (at left) says I live in the UK.

I too have had a guts full of the problems referred to by JosipBroz.

When I didn't have kwallet (kubuntu 7.10) installed kmail was always complaining about having to store the passwords. Now on another machine (Kubuntu 8.04.1-amd64) with Kwallet installed I have had lots of problems with it not accepting certificates and when told "accept - forever' It seems to think forever is till the next time it checks.
Will have to try the above and see i it works.