I was able to figure out the cause of the problem and come up with a solution.
In my original radgrid, I had autosizecolumnsmode set to 'fill'. When I changed the autosizecolumnsmode to 'none' before databinding and then after databinding set it to 'fill', the filtertextbox stopped vanishing suddenly after typing in one or two characters. Problem was solved.
In original scenario, as I typed the filtered rows showed up. If the number of filtered rows were 3 or 4 or less than the height available for data rows i.e. no vertical scroll was needed, then suddenly the width of the radgrid increases since its autosizecolumnsmode is set to fill. And this increase in width, was for some reason, causing the radtextboxeditor of filter to end its edit operation. Look at original video, and focus your eyes on the TOP right corner, and you'll notice the scrollbar vanishes causing the width of radgridview to increase WHEN number of filtered rows is very few.. Now look at this video Problem Solved
, where you will notice that when number of rows is very few, the width of the grid remains the same even though the vertical scroll bar has vanished. The space occupied by vertical scroll bar shows up as empty clearance space. The autosizecolumnsmode is set to none in the latter scenario.
Even though I have overcome this weird behavior, what I don't understand is why the width of radgrid should decide if the filtertextbox editing should end or not?
I wouldn't be surprised if this 'weird' and irritating behavior is also shown by the latest version of radgrid.