I have created a sample RadGrid web site to test the described behavior. On my side everything works as expected and the generated grid in Edit form is being successfully filtered. Please check out the attached application and try to distinguish the crucial differences between our projects.
All the best,
the Telerik team
If you want to get updates on new releases, tips and tricks and sneak peeks at our product labs directly from the developers working on the RadControls for ASP.NET AJAX, subscribe to their blog feed