Currently RadPanelBar does not support a "full height" mode for its items. This feature will be implemented in one of our next releases.
However, there is a possible workaround that you can use to achieve the "Outlook" behavior you describe even with the current version of RadPanelBar. I created a sample project for you in which you can see a possible solution for your problem. The demo application is attached to this post.
Let me know if you have any further questions.
the Telerik team
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