I hate to be the bearer of bad news (especially since it is you Telerik who created the RadMenu) but I don't think the Databindings Implementation you are using to implement the LastExpandLevel property
is designed for what you are trying to achieve in terms of Depth.
Let me explain.... if you look at this example of the RadMenu
you can see the the Depth property of databinding is only being used to format that particular level.
The way you are currently using it the Menu doesn't limit, well not exactly. The text isn't rendered past that depth but the actual menu items still get rendered in the HTML. So what I end up with once I apply a skin is the Root Menu items get rendered but when you hover over any items that have sub pages you can see the slide out appear (if styled in a way it can be seen). So what would be good would be for it to actually completely not render any child items past that depth.
I will in the meantime find a different approach to solve this.
Thought I would let you know in case you didn't ;)