Apparently you either have a bad ./wine/config file or you don't have the dll's necessary to run kazaa. Try following this tutorial:
1. Install Wine and set it's version to Win98
2. Install K++ 2.10 by entering command "wine klitekpp210b3e.exe".
3. You need to get some Windows dll's to your Windows/System/ directory.
Enter the following commands:
cd ~/.wine/fake_windows/Windows/System
mv commctrl.dll commctrl.dll.orig
mv comctl32.dll comctl32.dll.orig
mv comdlg32.dll comdlg32.dll.orig
mv msvcrt.dll msvcrt.dll.orig
mv rasapi32.dll rasapi32.dll.orig
mv shdoclc.dll shdoclc.dll.orig
mv shdocvw.dll shdocvw.dll.orig
mv shlwapi.dll shlwapi.dll.orig
mv urlmon.dll urlmon.dll.orig
mv wininet.dll wininet.dll.orig
wget
www.drd.dyndns.org/softlib/win98se/commctrl.dll
wget
www.drd.dyndns.org/softlib/win98se/comctl32.dll
wget
www.drd.dyndns.org/softlib/win98se/comdlg32.dll
wget
www.drd.dyndns.org/softlib/win98se/msvcrt.dll
wget
www.drd.dyndns.org/softlib/win98se/rasapi32.dll
wget
www.drd.dyndns.org/softlib/win98se/shdoclc.dll
wget
www.drd.dyndns.org/softlib/win98se/shdocvw.dll
wget
www.drd.dyndns.org/softlib/win98se/shlwapi.dll
wget
www.drd.dyndns.org/softlib/win98se/urlmon.dll
wget
www.drd.dyndns.org/softlib/win98se/wininet.dll
4. Add the following lines to ~/.wine/config
[AppDefaults\\\\KazaaLite.kpp\\\\DllOverrides]
\"*\" = \"builtin, native, so\"
\"commctrl\" = \"native\"
\"shdoclc\" = \"native\"
\"shdocvw\" = \"native\"
\"shlwapi\" = \"native\"
\"comdlg32\" = \"native\"
\"ole32\" =\ "native\"
\"oleaut32\" = \"native\"
\"rpcrt4\" = \"native\"
5. Now you should be able to run K++ by entering command "wine kpp.exe".
Notes: Only use dlls from a WIndows 95/98/Me installation! Make sure you use the default wine registry, otherwise you will get the error "Failed to create empty document".
Also, you should be able to fix the KDE desktop icon by doing the following: right-click the icon, select Properties, click the Execute tab, and change the path to the *linux* path of kpp.exe, not the Windows-style path using C:\ or whatever. So the full Command line should be:
wine '~/.wine/fake_windows/Program Files/Kazaa Lite/kpp.exe'
or whatever is appropriate for your setup. Also click the Permissions tab and check the Exec box for User. You should now be able to launch Kazaa Lite from the desktop icon, assuming you've gotten it working at the command line.
I could never get Kazaa to work under Linux myself, but I wish you luck!