This behavior is actually by design - when the ScrollViewer reaches the last item, and you continue to rotate the wheel, it doesn't scroll anymore and thus does not handle the MouseWheel event, which is propagated to the parent elements and the browser. This is because we generally handle the events only when we do something with them, e.g. scroll the ScrollViewer or handle the key press, etc.
In the current version of RadControls for Silverlight we do not provide a way to change this behavior. I am open for suggestions, that could be considered for Q3 SP1 (due 4-5 weeks after Q3).
the Telerik team