It seems that the theme is applied in a right way. Regarding changing to Windows7Theme, can you verify that a reference is added to the right theme assembly - Telerik.Windows.Themes.Windows7.dll and if it is, what is the error?
About the "black vertical bar" which is displayed - can you send us a project with the issue isolated. In this way it will be much more easier for us to help you, because we've tried to reproduce the problem, but to no avail.
In addition, can you check is the version of all assemblies used in your application the same and what is the exact version?
Looking forward to your reply.