In general I would suggest you going through the Degraded Performance help article suggesting on how you could improve the performance of RadGridView.
Silverlight 3 is a very old version. I would suggest you consider upgrading to our latest UI for Silverlight with support for Silverlight 5. We have done many improvements related to performance that you could benefit from.
We have also introduced Implicit Styles
to gain even more.
Check out Telerik Analytics, the service which allows developers to discover app usage patterns, analyze user data, log exceptions, solve problems and profile application performance at run time. Watch the videos
and start improving your app based on facts, not hunches.