I created a test project, based on your code, using the version of the binaries you are indicating (2011.3.1116.1040), however I could not reproduce the problem. When dragging the slider handles the RadChart successfully zooms in and out and when the dragging the whole slider, the visible area is scrolled. I have attached my test project for reference.
Additionally, you may be interested to review our newest charting component - RadCartesianChart (part of RadChartView). The RadChartView addresses some of the limitations and deficiencies that we have identified in the RadChart implementation over the years. It is easier to set up and customize, and has vastly improved performance, especially when zooming and scrolling.
You can check the online (Silverlight) demos on this link.
the Telerik team