This is my XML structure, like I said its very basic. I am just doing a quick example for a demonstration (on your product) next week. I use VB2008 as well.
I'm sorry I didn't guess the problem at the first glance. You need to set a value to the DataTextField property of the RadToolBar. To avoid the errors, you should define a value to the Text field of the XML nodes, which are set as separators. In addition (as the databinding does not handle this, you should add an event handler to the ButtonDataBound event to set them as separators).
Unfortunately the official release had a small glitch - the ButtonDataBound event did not get triggered. It is fixed in the latest internal build. Please, find attached the contents of its bin folder along with a small page demonstrating the approach. The official service pack is scheduled for the end of the next week.
FYI, the XML file you sent can be used with the LoadFile method of the RadToolBar.