When we drag and drop an Item of the RadTreeView out of the tree, the VisualState of the item stays mouse over.
Even if we click or drag other items, the only way to reset the VisualState of the item is to mouse over it. 
This can be observed in Silverlight's  Theming demo. 
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Resolution: The issue can be easily solved by setting telerik:TreeViewSettings.DragDropExecutionMode="New". This will be the default setting in future releases.