William, the fact that the example is using Entity Framework does not mean that Kendo UI supports it out of the box as a built-in feature. As I have said many times before Kendo UI is a client-side only library and has no notion of any server-side framework.
Data annotations are supported only in Kendo UI Complete for ASP.NET MVC.
Yes, those examples are supposed to be runnable. I just downloaded the project and it runs without an issue on my machine. We tested on a few other PCs as well without a problem. Find attached a screenshot showing how it should look like. Perhaps there is some sort of problem in your configuration. You can check what the web service has returned in Firebug.
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