Everything is running under KDE components including the media notifying daemon.
The thing is KDE recognises the USB device when it is connected and opens the window asking what you want to do, however selecting anything results in no action (eg Konqueror will not open when you select it in the options), and the USB devices do not appear as icons on the desktop like they did under 3.5.3. I can't even see the devices in /media either.
This all worked fine under KDE 3.5.3 but has stopped since I upgraded (more like downgraded) to 3.5.5
The fudge workaround I've found is to install 'ivman' although this is also not the best solution, otherwise I now have to mount everything manually.