It seems that it is not possible to bind the visibility property of a DataGridTemplateColumn in Silverlight 4 still. I did some Googling and there seem to be a few posts suggesting it was to do with the fact that it was not a DependencyObject and how this would change in SL4 but it does not seem to be the case.
To work around it, I do it in the code behind of the datagrid loaded event, but I am curious as to why this is the case?
Here is the error message I get (with a converter that returns a Visibility value):
{System.ArgumentException: Object of type 'System.Windows.Data.Binding' cannot be converted to type 'System.Windows.Visibility'.
at System.RuntimeType.TryChangeType(Object value, Binder binder, CultureInfo culture, Boolean needsSpecialCast)
at System.RuntimeType.CheckValue(Object value, Binder binder, CultureInfo culture, BindingFlags invokeAttr)
at System.Reflection.MethodBase.CheckArguments(Object[] parameters, Binder binder, BindingFlags invokeAttr, CultureInfo culture, Signature sig)
at System.Reflection.RuntimeMethodInfo.Invoke(Object obj, BindingFlags invokeAttr, Binder binder, Object[] parameters, CultureInfo culture, Boolean skipVisibilityChecks)
at System.Reflection.RuntimeMethodInfo.Invoke(Object obj, BindingFlags invokeAttr, Binder binder, Object[] parameters, CultureInfo culture)
at System.Reflection.RuntimePropertyInfo.SetValue(Object obj, Object value, BindingFlags invokeAttr, Binder binder, Object[] index, CultureInfo culture)
at System.Reflection.RuntimePropertyInfo.SetValue(Object obj, Object value, Object[] index)
at MS.Internal.XamlMemberInfo.SetValue(Object target, Object value)
at MS.Internal.XamlManagedRuntimeRPInvokes.SetValue(XamlTypeToken inType, XamlQualifiedObject& inObj, XamlPropertyToken inProperty, XamlQualifiedObject& inValue)}