Well to be honest I use UL menu's for everything.... ;-)
The images are not the problem, enough classes is... (I would use CSS background-images)
I think you need activeitem, activeparent, firstchild and lastchild...
Housemenu only renders the first one.
I created my own SKO now, but I used Javascript to add the extra classes before that.
I'm not sure but I think Telerik does render these classes... (never used it)