In order to change the visual appearance of any RadControl you can apply a custom theme. More information about editing the ControlTemplates of the RadControls you can find here: http://www.telerik.com/help/wpf/common-styling-appearance-edit-control-templates-blend.html
I prepared a sample project for you illustrating how to modify the RadPanelBarItem's ControlTemplate to remove the outer borders. Please take a look at it and let us know if you need more info.
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