I thought I had already posted a generally discouraging post about this, but can't find it on the boards yet. Anyway, I've found a partially satisfying answer on the KDE bug tracking site at
http://bugs.kde.org/
You can in fact select multiple records and add them all to a category. You select records in your address book with Edit > Select All or Ctrl-A. You can select a range by holding the shift key then clicking the first and last record in the range, and you can select a group of records one by one by holding the Ctrl key and clicking each one.
Once they are selected, the contacts can all be added to a category with Edit > Select Category.
This means (after backing up):
1. You can delete all the contacts in your book, then import a group, assign it to a category, then export it. IMPORTANT: use vCard 3.0 format to export. If you use LDIF you will lose the category information. Then you can clean out your address book, and do the same thing for each of your other groups. Finally, you reimport them all into an empty address book from the vCard backups.
2. You can select a group of records using a filter, then select all or a subgroup and assign it to a category.
Once you have a category, you can use it to define other categories (all records except those in certain categories, or a combination of categories). Then you can use the categories to make distribution lists.
Maybe there's some good documenation on this, but I didn't find it after an hour or so of looking.