The issue is that under the Menu tag you can have only one <Group> tag. It is the same scenario when you have an <Item> tag. You can place only one <Group> tag in it. However, to achieve the desired effect, you can place as may <Item> tags as you need as demonstrated in the sample page that I have attached.
the Telerik team
Registration for Q1 2011 What’s New Webinar Week is now open. Mark your calendar for the week starting March 21st and book your seat
for a walk through all the exciting stuff we ship with the new release!