Hello Darren Martin,
I have been looking into this now. Thank you for bringing it up!
My first two attempts to reproduce it were unsuccessful, there I used an ItemsSouce. It seems though that the bug is only present when the items are created in code. Indeed we have not handled this case correctly and at this point and the two-state mode was working as three-state.
The bug has been fixed and I am attaching the project that I used to reproduce it with updated dlls.
The changes could not be part of the SP released yesterday and will be included in next week's internal build and any release after this.
Your Telerik Points have been updated for your feedback.
the Telerik team
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