Here is a first attempt to log the symptoms of tdehwlib. The tdebase build options:

-DWITH_HAL=OFF
-DWITH_TDEHWLIB=ON

The first section explains the correct/proper behavior in a system with HAL:

-DWITH_HAL=ON
-DWITH_TDEHWLIB=OFF

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Digital camera
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With HAL:

Powering on the camera while connected to a USB port shows a desktop icon almost immediately.
A dialog appears asking me what to do.
The lsusb command lists the device.
When disconnecting or powering off, the icon disappears almost immediately.

With TDEHWLIB:

Powering on the camera while connected to a USB port does not show a desktop icon.
No dialog appears asking me what to do.
The lsusb command lists the device.

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Inserting a DVD
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With HAL:

After about 7 seconds an icon appears on the desktop.
A dialog appears asking me what to do.
The dialog (correctly) does not include an option to "Download Photos with Digikam."
Using the desktop popup menu, selecting Properties shows the Mounting tab in the dialog.
Using the desktop popup menu, the device mounts in /media.
Using the desktop popup menu, the device unmounts.
Using the desktop popup menu, the device ejects.

With TDEHWLIB:

Nothing happens. No desktop icon, no dialog.

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Floppy drive
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With HAL:

When configured in Configure Desktop -> Behavior -> Device icons, an icon appears on the desktop for unmounted floppy.
Using the desktop popup menu, selecting Properties shows the Mounting tab in the dialog.
Using the desktop popup menu, the device mounts in /media/floppy, as configured.
Using the desktop popup menu, the device unmounts.

With TDEHWLIB:

When configured in Configure Desktop -> Behavior -> Device icons, an icon appears on the desktop for unmounted floppy.
Using the desktop popup menu, selecting Properties does not show the Mounting tab in the dialog.
Using the desktop popup menu, the device mounts in /media/fd0, not as configured.
A dialog (incorrectly) appears asking me what to do.
The dialog (incorrectly) includes an option to "Download Photos with Digikam."
Using the desktop popup menu, the device unmounts.
A dialog (incorrectly) appears asking me what to do.
The following appears in the xsession log:

[tdeinit] Got EXEC_NEW 'kio_media' from launcher.
[tdeinit] Got EXEC_NEW 'kio_media' from launcher.
[FIXME] UNCLASSIFIED DEVICE name: fat_cache type: (null) subsystem: slab driver: (null) [Node Path: (null)] [Syspath: /sys/kernel/slab/fat_cache] [(null):(null)]
[FIXME] UNCLASSIFIED DEVICE name: fat type: (null) subsystem: module driver: (null) [Node Path: (null)] [Syspath: /sys/module/fat] [(null):(null)]
[FIXME] UNCLASSIFIED DEVICE name: fat_inode_cache type: (null) subsystem: slab driver: (null) [Node Path: (null)] [Syspath: /sys/kernel/slab/fat_inode_cache] [(null):(null)]
[FIXME] UNCLASSIFIED DEVICE name: vfat type: (null) subsystem: module driver: (null) [Node Path: (null)] [Syspath: /sys/module/vfat] [(null):(null)]
[FIXME] UNCLASSIFIED DEVICE name: nls_cp437 type: (null) subsystem: module driver: (null) [Node Path: (null)] [Syspath: /sys/module/nls_cp437] [(null):(null)]
[tdeinit] PID 12290 terminated.
[FIXME] UNCLASSIFIED DEVICE name: nls_iso8859_1 type: (null) subsystem: module driver: (null) [Node Path: (null)] [Syspath: /sys/module/nls_iso8859_1] [(null):(null)]
[tdeinit] Got EXEC_NEW 'kio_system' from launcher.
[tdeinit] Got EXEC_NEW 'kio_media' from launcher.

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USB flash drives
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With HAL:

After about 5 seconds an icon appears on the desktop.
The device automounts, per my configuration.
The lsscsi command lists the device.
The lsusb command lists the device.
The device icon label remains the same regardless of which physical port the device is connected.
Using the desktop popup menu, selecting Properties shows the Mounting tab in the dialog.
The device mounts in /media.
Using the desktop popup menu, the device unmounts.
Using the desktop popup menu, selecting Safely Remove and the icon disappears.

With TDEHWLIB:

After about 30 seconds an icon appears on the desktop.
The device does not automount, per my configuration.
The lsscsi command lists the device.
The lsusb command lists the device.
The device icon label does not remains the same regardless of which physical port the device is connected.
Using the desktop popup menu, selecting Properties does not show the Mounting tab in the dialog.
Using the desktop popup menu, the device mounts to /media/sdf1 and not to the directory name I configured.
Using the desktop popup menu, the device unmounts.
Using the desktop popup menu, selecting Safely Remove, the icon sometimes disappears and sometimes does not.

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Summary
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As first step I suspect fixing the missing dialog Mounting tab will help. I'm guessing because the tab and dialog are missing, tdehwlib is ignoring everything the user has configured about a device. The global mount options in KControl->Peripherals->Storage Media does appear to be functional, but without the dialog Mounting tab for each device, each device can't be configured or verified.

Darrell