Could you please tell me the exact version of Telerik controls you are using. I managed to reproduce the issue with 2010.1.603.1040 (Service Pack). However with 2010.1.609.1040 (Beta) this issue has been fixed. Try downloading our latest internal build (2010.1.625.1040) and see if you still manage to reproduce the issue. I've attached my test project for further reference.
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