Actually this is expected behavior - there are differences between how this property performs in Silverlight and WPF.
MSDN statement regarding isTabStop property is as follows:
"If IsTabStop is false, the control is excluded from tab navigation. In addition, if IsTabStop is false, the control cannot receive input focus." (link)
RadWatermarkTextBox inherits from Microsoft TextBox and the property cannot be overridden.
All the best,
the Telerik team