Sorry for the delay in my reply. We are preparing our next release and we were not able to handle your request earlier.
I believe you downloaded the zip file with the free controls and extracted it to a custom folder.
The error comes from the fact that Visual Studio doesn't have any other information with regards to the dependent assemblies of one assembly.
I suggest that you get the Telerik Silverlight VSExtensions
and use them to create your project. You will get a wizard, which will help resolve the correct assembly dependencies during the creation of your New Telerik Silverlight Project.
Let me know if that helps.
the Telerik team