This is my interpretation...

Lets asume you are a CE user and not have Telerik license.

What can you do.

You can use skinobject with wrappers released at codeplex. (radmenu etc..)

You can use wrappers that are included in the DNN release.

As an example you can use the wrapper for  telerik grid like this

<dnn:DnnGrid ID="grdPlayer" runat="Server" Width="100%" AutoGenerateColumns="false" AllowSorting="true"  

 PageSize="5"   MasterTableView-AllowPaging="true">

    <MasterTableView EditMode="InPlace" AllowSorting="true" AllowMultiColumnSorting="false">

        <Columns>.........


But you can only use those wrappers that have been delivered by DNN...

If you do like this you can sell it or do it how you like..

I understand the part of the module developer who doesn't have a Telerik developer license. They can only use what comes with DNN CE (dll + wrappers)

Say I have a Telerik developer license. Note that it comes with Telerik's own DNN provider for the RadEditor. I don't know how it's different than the one provided by the corp for the PE version. I this point I don't care because I don't use PE (but I am interested to know which one is better if they are not the same or of the corp's is based on Telerik's).

Hypothatically: What if I develop my own HTML Editor DNN module which uses the RadEditor and it uses the provider which I got with my developer license. I decide to give away for it free. What's Telerik's and the corp's stance in this case in terms of licensing? My understanding is that I can do whatever I want with the developer license.

On a side note, the fact I shouldn't package my Telerik dll in my module is not a licensing issue. It's a technical one so that mine doesn't overwrite DNN and DNN can use only one version. I find this an issue with Telerik controls. I used Infragistics controls before and was able to use more than one version of them in the same web project. I think they use different public keys and file names.

AFAIK, you can't use that dll in Visual Studio. You'll be missing the design counterpart of the dll. Otherwise any developer can use the dll from any software which packages it.

The module I am talking about is an HTML Editor for DNN . It's not a RadEditor replacement. It just incorporates it. These are not the same thing. Basically replacing DNN's HTML module, which just an ASP.NET user control.

What safeguards? I am sure I can release the dll with my software and release it for free if I want to. How much I paid for it doesn't matter. 

You can't have two versions of the Telerik dll in DNN. The web.config change basically forces DNN to use the one you specify. This basically forces all the modules from the different module vendors which incorporate Telerik,  and which could have been developed and tested under different versions, to use and share the same version. It seems the newer version is backward compatible with the older ones, which is a good thing. Otherwise a module could not function properly if the newest Telerik dll has one or more breaking change. If you report problems to the module developer, one of the first questions they should ask is what version of Telerik are you using. If you say yours is different than his, he can simply say he can't help.