Obviously the underline is inherited from your custom styles too - most probably from a global a:hover
CSS setting. The approach that you can use is similar to the one I gave Clive earlier.
The difference is in the selector that should be used. You may try the following:
text-decoration: none !important;
Note: The solution I give you is for the latest version of FormDecorator. If you are using an older version of the control you may use IE Dev Toobar or FireBug to see what exactly is being rendered in the dropdown and respectively override the inherited text-decoration
CSS property of the element that is underlined on hover.
the Telerik team