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For starters, I think the new KDE4 UI looks beautiful. It's smooth and rounded and uses antialiasing and all-around out-Apple's Apple. For once, a Free desktop is no longer playing catch up with Windows and MacOS X and is finally really innovating.

The one problem I have with the look of KDE4 is that the default window decorations look totally out of place. They stick out like a sore thumb. Everything else looks nice, but the window decorations look totally out-dated.

Invest more effort into making the window borders and title bar, etc. look more like the rest of the UI. (But don't make it blend in so much that you can't find them either.)

Please note that other themes such as Bespin, and the ones shipped with KDE 4 are also available.

I would say that oxygen looks a bit strange to me too. But that's why I prefer to use Bespin.
It's really nice looking theme. (I just hope that it would have a better Gtk integration.)

Plasma decorations as kwin decorations would make whole UI consistent.

vip wrote:Plasma decorations as kwin decorations would make whole UI consistent.

That's another idea that was proposed by Pol666.
You probably know that and are mentioning it for that exact reason.
I would agree that plasma themes could provide a windows deco theme for grater consistency.
But you should be able to override it. I just like Bespin and Can't say which plasma the turned to windows deco would make me change my mind.
* Primoz tries to think how my Bare Naked theme would look like windows-deco.