I've been checking up on the progress of KDE 4 using the Kubuntu member repository as it moved through various betas and a few days ago the official 4.1 release moved in. While it obviously lacks the many years of polish that went into KDE3, at this point its basically mature enough that I'm now using it as my full time desktop.
Many of the applications do not yet have KDE4 versions available, but you can seamlessly run their KDE3 counterparts in the KDE4 desktop. Additionally the Kubuntu team needs to add their own distribution polish -- like the fact that gtk-qt-engine-kde4 is not selected by default. There are still the occasional bug and still some of the Plasma areas don't work as intended, but you can already tell how much better this upgrade will be once it's had the opportunity to soak a bit.
The next Kubuntu release in October should have KDE4 as the default (or at least among the list to choose from -- KDE3, KDE4, Gnome).