From the reference guide: "Note Konsole support only works for KDE 3.x. Also, "auto" is the default behavior for OE_TERMINAL" If it is already working, then the documentation has to be updated. I will leave it with you how to process.
When I last investigated this, it was not possible because there was no way to launch a single instance of Konsole (regardless of the presence of existing instances) and wait for it to terminate. I even looked at fixing Konsole to allow this, however it seemed to me that the background launching/instance code was integral to the KApplication class and there was no means to override it from classes that inherited it. Maybe this has changed in the mean time, I do not know.
Is there still anyone using KDE 3?
Not sure. Frankly I'd love it if we could support Konsole in KDE 4 since I use it every day (although I've got used to the integrated screen support, so it doesn't bother me as much as it used to). It just doesn't seem to be very straightforward as I explained above.
This has now been fixed in master: http://git.yoctoproject.org/cgit/cgit.cgi/poky/commit/?id=6d7cf8e9dd00bdff882311fecbadfadc46e9cc03
Thanks Paul!