Well, I installed Pulse Audio using task-pulse, rebooted and made sure everything was selected and enabled. Did a full update which included the dreaded phonon-vlc and the results were the same, system sounds broke again.
This time I had copied the folders 'phonon_backend' and 'phonon_platform' found in usr/lib/kde4/plugins/ to a safe place, so I just renamed the updated folders as old, and copied the previous folders back in and system sounds returned to normal. As Pulse Audio didn't do anything that I didn't have before, I uninstalled it and went back to what I was using to start. At least now I don't have to keep watching for phonon-vlc updating to the broken version, as synaptic thinks I have the latest version anyway. Still... I realize it will most likely break again down the road, but hopefully by then there will be a new distro disk so I can do a fresh install that will hopefully work.