It seems that a recent change broke the WSS v3 compatibility. You can work around this issue by creating two empty files in the \Program Files\Common Files\Microsoft Shared\web server extensions\12\TEMPLATE\LAYOUTS\1033\ folder. The files should be called "AssetPickers.js" and "HtmlEditor.js".
We will fix this problem and release an updated version shortly. I apologize for the inconvenience.
the Telerik team