Thank you for contacting us.
Indeed this is a known issue. We tried to implement update of the assemblies registration as part of the Upgrade Wizard but we encountered a problem. The problem is that the Upgrade Wizard not always has access to the registry since it is located under HKEY_LOCAL_MACHINE. We wanted to move the registration under HKEY_CURRENT_USER as we did for other products but it appeared that Visual Studio doesn't use this registry for Windows Phone projects.
Replacing assemblies in the installation directory works but it is not recommended because it can cause installation issues later.
What I suggest is to use the msi installation package when updating to the latest version of the RadControls.
I hope the information provided clarifies the scenario. If you have any further questions don't hesitate to write us again.
the Telerik team