While the Keyboard navigation is enabled, navigating through the items using the UP/DOWN arrows does mark the rows active, however, the active styles remain for the rows even if they aren't active anymore.
The issue happens when using the ActiveItemStyle element to define the styles (e.g. ForeColor, BackColor, etc.). Works as expected using the default styles.
Code to replicate the issue
<script runat="server">
protected void RadGrid1_NeedDataSource(object sender, GridNeedDataSourceEventArgs e)
{
(sender as RadGrid).DataSource = Enumerable.Range(1, 5).Select(x => new
{
OrderID = x,
OrderDate = DateTime.Now.Date.AddDays(x),
Freight = x * 0.1m,
ShipName = "Name " + x,
ShipCountry = "Country " + x
}).ToList();
}
</script>
<telerik:RadGrid ID="RadGrid1" runat="server" RenderMode="Lightweight" OnNeedDataSource="RadGrid1_NeedDataSource">
<ActiveItemStyle BackColor="Red" ForeColor="White" />
<ClientSettings AllowKeyboardNavigation="true">
</ClientSettings>
</telerik:RadGrid>