I am logged into my local machine using the Administrator account, so I have full Admin access. I tried re-installing VS2008 SP1, completely removed Telerik, removed the entries from the registry, removed the "Telerik" folder from C:\Program Files (x86)" but to no avail. The only option that works is the "Report Wizard".
I also have Visual Studio 2010 Ultimate (SP1) installed, and it works absolutely fine there. I will try the latest internal build to see what happens. I have tried installing Telerik with examples and without examples but that doesn't do the trick either. I am running out of options.