Try setting lower z-index of RadMenu than RadGrid, so that the filtermenu will appear above the RadMenu. It works for me. Check this and see whether working for you.
|<telerik:RadMenu ID="RadMenu1" Runat="server" style="z-index:1000;" >
| . . .
You can also refer to the following link to know more about z-index.
Controlling absolute positioning with z-index