First, by explicitly embedding a TextBox as the content for a DataFormDataField, you can bypass this problem. That is, instead of:
That's not really much of a solution, though. It works because we're using non-telerik data fields that ignore whether the form is in readonly or edit mode.
My best guess at the real problem is that we're binding CurrentItemProperty to the viewmodel in the xaml, at a point at which the viewmodel hasn't yet been set. What works, and seems to be the correct solution is to bind CurrentItemProperty in DataContextChanged. If I do this, and have AutoEdit="True", the form is in edit mode, when it opens.