I'm using RadControls for AJAX Q1 2008 I got the 'telerik is undefined' javascript error on both IE7 and Firefox 3.5.3 and the way I fixed it was to replace the RadScriptManager I was using with the regular .NET ScriptManager.
Apparently, in the latest versions of the RadScriptManager control (Q3 2009), there is an OutputCompression and setting it to false will solve the problem as well but I'm not able to test it; something you can try.