This would indeed require the installation of the framework on both the build server and each of the test agents". We don't allow our installer/framework files to be repackaged or bundled with any other product, so as long as you stipulate that your testing .dll(s) rely on Telerik Testing Framework which is downloaded and installed from us, you are good to go.
All the best,
the Telerik team
for a live 'What's New in Test Studio R1 2011 SP2' event on Tuesday, July 19 at 2pm EST!
Have you looked at the new Online User Guide
for Telerik Test Studio?