I managed to break it.
It appears that my problem relates to creating the group descriptor in XAML, combined with adding the following code on the Grid DataLoaded event.
sender, System.EventArgs e)
When this runs - you get a null reference exception. However with my solution which does not use the RadDomainDataSource controls, it does not throw this error.
However what it does do is cause problems with setting SelectedRow - on my ViewModel. If I manually remove the grouping then drag it to the group header, it all works fine!!
Hope you can provide a solution - we really need our groups to be expanded by default - a much nicer user experience.