Sorry to hear you're having trouble. I think this may be a case where the error being highlighted by Visual Studio is not directly pointing at the problem. I expect there may be another issue with your environment. First of all, do you have .NET 2 + ASP.NET AJAX and/or .NET 3.5 installed on your machine? One of those will be required to use the RadControls.
Also, which demo are you trying to run? When running demos locally, I always suggest configuring the Telerik "Live Demos" directory as a website in IIS (that's the best approach) or opening the Telerik demos solution in VS 2008 and then using the "Browse Page" function for the demo you want to review. If you're using Vista Home Premium, you will probably need to install IIS as optional software, but I'd suggest doing that for the best results.
Hope that helps. Please let me know if you have more info about your setup and problem and I'll be happy to provide more input.