Setting the Height of the RadTreeViewItems breaks the logic in the MeasureOverride and the items are not drawn. If you remove the lines in which the Height is set the RadTreeViewItems from the 3rd level will be shown. Is Height of 20 a mandatory requirement in your scenario ?
On a side note, we highly encourage you to databound your tree and not populate it on your own with creating RadTreeViewItems in XAML or code behind - this way you loose the ability to virtualize items
which speeds up the performance for the tree.
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