http://docs.kde.org/development/en/kdebase/kdm/kdm-files.html
http://docs.kde.org/development/en/kdebase/kdm/index.html

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KDM's configuration is stored in /share/config/kdm.

Following configuration files can be found there (files not described
here are insignificant for the purpose of modifying the login manager
screen background):
kdmrc		— main configuration file, describes the look and feel of the
		  login window as well as login options and permissions.
backgroundrc	— stores the configuration of the login screen background,
		  which is drawn by kdesktop
Xsetup		— shell script which is run as root just before the login
		  window appears
Xstartup	— shell script which is run as root after the user has been
		  authenticated and before his or her session starts

KDesktop does not work with just any program that draws to the root window
and can only use specially written applications (e.g. kworldclock) to draw
an animated background. Thus, in order to animate the background using an
application which was not designed to work together with KDM, it is necessary
to first turn off kdesktop which draws on top of the root window and covers
it. This is accomplished by setting UseBackground=false in kdmrc.

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Here is an example, for changing resolution and the KDM background. 
(the mode resources should eventually migrate into the hardware header 
files) 

!kdm.commands mEXTRA(kdmenu) 
kdm.command_kdmenu /usr/lib/lcfg/conf/kdm/kdmenu 
kdm.menu resolution background 

xfree.modes_16bit[resolution=high] 1152x900 
xfree.modes_16bit[resolution=medium] 1024x768 
xfree.modes_16bit[resolution=low] 800x600 

xfree.modes_8bit[resolution=high] 1152x900 
xfree.modes_8bit[resolution=medium] 1024x768 
xfree.modes_8bit[resolution=low] 800x600 

xfree.modes_24bit[resolution=high] 1152x900 
xfree.modes_24bit[resolution=medium] 1024x768 
xfree.modes_24bit[resolution=low] 800x600 

kdm.mitems_background penguinbg nobg 
kdm.mitem_penguinbg Penguin 
kdm.mitem_nobg Default 
kdm.mcmd_penguinbg context background=penguin 
kdm.mcmd_nobg context background= 
kdm.wallpapermode[background=penguin] Scaled 
kdm.wallpaper[background=penguin] /usr/share/wallpapers/LonePenguin.jpg 

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/etc/kdm3/kdm/kdmrc

# If true, krootimage will be automatically started by KDM. Otherwise, the
# Setup script should be used to setup the background.
# Default is true
#UseBackground=false
# The configuration file to be used by krootimage.
# Default is "/etc/kde3/kdm/backgroundrc"
#BackgroundCfg=