Hi Karn,
Don't give up yet!
While I haven't run into what you've described myself, my understanding is that there's a bug in the 1.00 firmware provided with the K20D. You need to go to the
Pentax Website and get the latest firmware (version 1.01).
This ought to fix the hot pixels when using 2 second timer mode... I'm using it (version 1.01) and 2 second timer mode, and not experiencing this problem. But I shoot RAW, and convert to JPEG using ACR from CS3....
-Chris