It seems that the problem is with the backslashes. Changing the UriSource/Source to
"Images/team challenge logo.jpg"
solves the problem.
I have no idea why the images show at design time either. That is how they work for Images in general, not only when they are embedded in the document of the rich text box via InlineUIContainers.
On a side not, you should note that image files with build action of both Resource and Content will show in an Image, but in order to be able to show the pictures in ImageInline, the build action has to be Content.
All the best,
the Telerik team
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