This bug seems to have been fixed in the latest update, at least for me.
Thanks!

Kate now reports "Version 3.1.1" and "Using KDE 4.1.1 (KDE 4.1.1)"
Synaptic reports "kate-kde4" version "4:4.1.1-0ubuntu1~hardy1~ppa1"
(using "deb http://ppa.launchpad.net/kubuntu-members-kde4/ubuntu/ hardy main")

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https://bugs.launchpad.net/bugs/254268
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