For the time being the following CSS can be used:
CSS:
        <style>
            .RadPanelBar .rpGroup .rpLink, .RadPanelBar .rpGroup .rpTemplate .RadButton {
                line-height: normal;
            }
        </style
ASPX:
        <telerik:RadPanelBar ID="rpbOptions" runat="server" Width="200px" ExpandMode="SingleExpandedItem" AllowCollapseAllItems="true" Font-Bold="True">

            <Items>
                <telerik:RadPanelItem Text="Delivery Method" Font-Size="Small">
                    <Items>
                        <telerik:RadPanelItem Expanded="true">
                            <ContentTemplate>
                                <div id="div1">
                                    &nbsp;
                     <telerik:RadButton ToggleType="Radio" ButtonType="ToggleButton" ID="RadButton9" runat="server" GroupName="gDeliveyMethod" Checked="true" AutoPostBack="false" Text="Pickup" ForeColor="#295B8B"></telerik:RadButton>
                                    <br />
                                    &nbsp;
                      <telerik:RadButton ToggleType="Radio" ButtonType="ToggleButton" ID="RadButton10" runat="server" GroupName="gDeliveyMethod" AutoPostBack="false" Font-Size="X-Small" ForeColor="#295B8B" Text="Courier"></telerik:RadButton>
                                    </span><br />
                                    &nbsp;
                      <telerik:RadButton ToggleType="Radio" ButtonType="ToggleButton" ID="RadButton11" runat="server" GroupName="gDeliveyMethod" AutoPostBack="false" Font-Size="X-Small" ForeColor="#295B8B" Text="US Mail"></telerik:RadButton>
                                    <br />
                                </div>
                            </ContentTemplate>
                        </telerik:RadPanelItem>
                    </Items>
                </telerik:RadPanelItem>
            </Items>
        </telerik:RadPanelBar>