The issue is reproducible only on Windows XP. On newer versions of windows, the images are rendered as expected.

WORKAROUND: You may inherit DctDecode class in order to implement custom decoder. For instance, you may try calling DecodeWithJpegDecoder method from the base class as mentioned in the note of this documentation article:

http://docs.telerik.com/devtools/wpf/controls/radpdfviewer/customization-and-extensibility/customize-pdf-rendering

A sample implementation of these custom decoder may be seen below:

public class CustomDctDecode : DctDecode
{
    public override byte[] Decode(PdfObject decodedObject, byte[] inputData, DecodeParameters parms)
    {
        return DecodeWithJpegDecoder(inputData);
    }
}