As I said in my previous post, the Hierarchical data source was added in Kendo UI Q2 Official release - please make sure you use the 2012.2.710
version. If the version is the correct one and the problem still persist, please provide a small but runnable project that reproduces the issue. This way I will be able to investigate the case and advice you further.
the Telerik team
Join us on our journey to create the world's most complete HTML 5 UI Framework - download Kendo UI