Thank you for the additional feedback.
We managed to reproduce the issue when starting the VSB within Visual Studio and, as strange as it seems, it turned out that the problem is related to the IDE. It tries to replace our default "Insert image" dialog with VS's own "Insert from resources" dialog, which in turn breaks the operation and the result is the one you have noticed. This is reproducable on both VS2005 and VS2008.
You can avoid the issue by starting the Visual Style Builder
as a stand-alone application, either from the Start Menu, from the installation on your hard drive, or from the QSF. Sorry for the introduced inconvenience. We will try to address this problem for SP1.
The second issue we cannot reproduce with Q3 2008, and we have never encountered such an issue in the support communication, including Q2 2007. The only question I have is whether you use Remote Desktop. If so, please try to do this directly on the machine and let us know what the result is. Additionally, try the latest Q3 2008 and lets us whether you experience the same problem.
Do not hesitate to contact me back if you have more questions.
the Telerik team
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