The TopTemplate will be assigned as a template only if the TabStripPlacement is set to 'Top" - you probably have already done so.
There is a bug that does not allow us to change the Template of an Items control that is "live" (in the live visual tree) and has items. There is a an expensive workaround that involves removing and then readding (and sometimes recreating) all its items.
We did not want to introduce the ugly workaround everywhere since have reported that bug to MS and it will be fixed in the next release. Currently, the items are recreated/readded only when the TabstripPlacement changes.
In short: Make sure that in the Xaml no Template is set, the TopTemplate should be fine as it is now. Then try switching the TabStripPlacement property in Blend.
Do you see the correct template at runtime?
Silverlight can easily make a no-expert of any one of us and yet I love it :)
the Telerik team
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