In the RadDataPager, instead of binding to RadBook's ItemsSource, you need to bind to RadBook's PagedItems property:
<telerikGridView:RadDataPager x:Name="radDataPager2" HorizontalAlignment="Center"
, ElementName=book1}" DisplayMode="All" PageSize="1"
Give it a try and let me know how it works for you.
On a side note, I'd like to inform you that we've just released an online tool that allows you to reduce the size of your Silverilght applications. For more information, please visit http://blogs.telerik.com/blogs/posts/10-06-10/telerik_assembly_minifier.aspx
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