Edit: Title was supposed to read:
Bug Report: shows in Grid DropDownColumn and RadComboBox
When I upgraded to 2011.2.712.40 I now see in these grid columns sometimes. You can see it on your own demo page: http://demos.telerik.com/aspnet-ajax/grid/examples/generalfeatures/columntypes/defaultcs.aspx
(Look at the RadComboBox for 'Andrew Fuller' in the second grid.)
Testing in my project, I switch to 2011.1.519.40 and does not show. Update the reference to Q2 and shows again.