Sorry to hear you had so much trouble. In truth, the .NET 3.5 SP1 beta really was terrible. It was one of the "real betas" that you don't see too often these days. Fortunately, the final version of .NET 3.5 SP1 and VS 2008 SP1 is now available
, so you can probably solve most of your problems that way.
Generally speaking, though, the emergence of the SP1 release shouldn't affect your ability to use the RadControls. Building on Microsoft's ASP.NET AJAX framework is just the natural evolution of ASP.NET UI component development, so it won't change our commitment to staying ahead of MS or releasing fixes as customers need them. I think you'll find that instead our controls are more stable, better performing, and easier to maintain than ever before.
Microsoft's SP1 beta clearly was a bad experience, but I think you'll find in the future Telerik can still bring the same magic we've always brought to ASP.NET while building for the new framework features. Hope this helps!