Seems to be more of a problem for people who have recently switched to KTM's. I had the same problem with my first KTM, a 98 380, too. I adjusted the engagement point down, tried different compounds and styles of brakes (late model Honda CR250 OEM pads work awesome on these bikes, BTW), etc. Even went to a solid rotor. I thought I'd finally gotten the correct setup as the problem went away.
Then I got my 99 250E and didn't have to do anything. Apparently, I'd just gotten used to the KTM brakes. Same thing happened when I got my 01 400E. No stalling, great brakes. I think they are still touchy but I've just gotten better at modulating them.