I tested the described scenario and the binding works as expected.
My NavigationViewModel contains NavigationItems property which holds the view models for the outlook bar items. Each of those view models contains a Children property that holds the view models for the tree view items. And each tree view item model contains a Children collection.
I noticed that you were using the HierarchicalDataTemplate from the System.Windows.Controls namespace and there is no ItemTemplate defined for it. When you use RadTreeView you will need to use the Telerik.Windows.Controls.HierarchicalDataTemplate class instead. Otherwise when you don't define ItemTemplate for the HierarchicalDataTemplate only the first level of the tree will be displayed. If there is no ItemTemplate defined our hierarchical template uses itself as its ItemTemplate.
Can you please try to replace the <windows:HierarchicalDataTemplate> in the RadTreeView.ItemTemplate with <telerik:HierarchicalDataTemplate> and see if it works as expected.
You can also take a look at the Data Binding SDK example
which demonstrates data bound outlook bar with a TreeView inside it.
If this doesn't help, can you please prepare an isolated project with your implementation and steps to reproduce the issue. This will allow us to test it locally and investigate what is missing from the project.
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