The decorating logic of the RadFormDecorator hasn't been changed since the first release. Basically, it doesn't matter where the form decorator is - it will either decorate all controls on the page or will decorate only the ones in the decoration zone. To illustrate this, I attached a small sample project with the Q1 version and your code - as you can see from the attached screenshot both textboxes are styled. In scenarios like yours where you need to decorate only portions of a page, you should use DecorationZoneID. We always recommend to put the RadFormDecorator first on the page (after the script manager) only to ensure that it will be loaded before the other ASP.NET AJAX controls.
the Telerik team