It is not possible to drop between the nodes as this is a design limitation. In order to do that we will need to change the drop and down behavior of RadTreeView, which may lead to breaking changes.
All the best,
the Telerik team
If you want to get updates on new releases, tips and tricks and sneak peeks at our product labs directly from the developers working on the RadControls for ASP.NET AJAX, subscribe to their blog feed