Comment 6 for bug 208253

I can confirm that in my case the [$e] does indeed seem to be the culprit. I had no ~/.config/user-dirs.dirs at all until changing the settings via KMenu->System Settings. Once I had changed those settings, the new directory I specified for Desktop appeared in user-dirs.dirs with the [$e]. Logging out and back in revealed no change (the contents of the root directory was still on the desktop), but removing the [$e] from the lines in there and logging out/back in then fixes the problem.

I'm a little puzzled that the Desktop directory was set to / even without the presence of user-dirs.dirs in my home directory (does this imply that some system-wide setting is using / as the default Desktop directory for new users?), and also that others have not mentioned this [$e] when documenting their workarounds (in this bug and bug #174532).