There was a very similar issue to this logged here.
And here is a simple project showing the problem. Notice that when you attempt to enter a <space> in either of the TextBox controls, the first keypress seems to be ignored. Subsequent <space> characters are ok.
<UserControl x:Class="SilverlightApplication61.MainPage"
>
<UserControl.Resources>
<DataTemplate x:Key="LabelTemplate">
<TextBlock Text="{Binding ., StringFormat='\{0\}:'}" VerticalAlignment="Center" Foreground="Green" FontSize="12" Margin="25,0,5,0" />
</DataTemplate>
</UserControl.Resources>
<Grid x:Name="LayoutRoot" Background="White">
<telerik:RadDropDownButton Height="50" Width="50" DropDownWidth="280">
<telerik:RadDropDownButton.DropDownContent>
<Grid>
<Grid.RowDefinitions>
<RowDefinition Height="Auto" />
<RowDefinition Height="Auto" />
</Grid.RowDefinitions>
<Grid.ColumnDefinitions>
<ColumnDefinition Width="Auto" />
<ColumnDefinition Width="1*" />
</Grid.ColumnDefinitions>
<telerik:Label Grid.Row="0" Grid.Column="0" Content="Field 1" ContentTemplate="{StaticResource LabelTemplate}" />
<TextBox Grid.Row="0" Grid.Column="1" FontSize="14" Text="{Binding Field1, Mode=TwoWay}" Margin="0,4,3,2" />
<telerik:Label Grid.Row="1" Grid.Column="0" Content="Field 2" ContentTemplate="{StaticResource LabelTemplate}" />
<TextBox Grid.Row="1" Grid.Column="1" FontSize="14" Text="{Binding Field2, Mode=TwoWay}" Margin="0,4,3,2" />
</Grid>
</telerik:RadDropDownButton.DropDownContent>
</telerik:RadDropDownButton>
</Grid>
</UserControl>