In order to change the DragVisual runtime you'll have to use a ContentControl and change its Content/ContentTemplate instead:
ContentControl dragCue =
sender, DragInitializeEventArgs args)
.dragCue.Content = draggingImage;
sender, Telerik.Windows.DragDrop.DragEventArgs e)
This way the DragVisual will be the same object but you'll be able to change its appearance.
I've attached a sample project demonstrating this so could you please examine it and if you have more questions feel free to ask.
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