Yes, you can use a ContainerBinding to set the Image property of the BreadcrumbItems and set the converter there.
For further references could you please examine the attached project (in it I don't convert byte arrays to ImageSources, instead in the converter I just return the value, but you can see where to place the converter) and if you have further questions please feel free to ask.
Note: Note that you'll have to set the ContainerBinding to both the HierarchicalDataTemplate and its ItemTemplate, so that you'll have both images - the one in front of the RadBreadcrumb and the one in the DropDownContent of the splitbuttons.
the Telerik team
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