Please read our KB article on Resolving Common Scheduling Issues
You mentioned your execution server is a Virtual Machine. Please ensure it is not locked. Any test that requires moving the mouse or sending keystrokes requires an unlocked desktop. Telerik tests are not the only ones affected by this Windows limitation. You will find this is a general problem with any tool that performs UI testing.
Our tests against HTML based web applications frequently can work on a locked machine because most test steps don't use the mouse or keyboard. Instead they are able to inject Click or Select events against the element in question (e.g. a button or drop down select). Unfortunately Silverlight doesn't allow us to inject these events. We have to simulate system wide mouse moves and mouse clicks instead.
Some of our customers report success using a VNC product. With this they remotely connect to the test machine, leave the user logged on but disconnect the VNC connection. This leaves that Windows session open and unlocked, but humans still cannot access it without reconnecting the VNC connection (which usually means re-authenticating).
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?