Do you mean you try to upgrade your existing project, or are you trying to create a new one?
If the problem happens during the upgrade of the project, I would suggest that you update the Telerik WPF VSExtensions
(to my regret we had a bug in the official release, related to the project reference update; we just verified the bug is fixed and uploaded a newer version of the VSExtensions to the gallery).
On the other hand, if the problem happens when creating a new Telerik WPF project, I would ask you for the version of the Telerik WPF VSExtensions (can be checked through the Tools -> Extension Manager menu in Visual Studio).
Let me know if that helps.
the Telerik team
Register for the Q2 2011 What's New Webinar Week. Mark your calendar for the week starting July 18th and book your seat for a walk through of all the exciting stuff we will ship with the new release!