It's very similar to the custom Filter Menu (http://demos.telerik.com/kendo-ui/grid/filter-menu-customization). I made the mistake of no using valuePrimitive: true. You might not want it in your situation but keep that in mind.
Here's a sample: http://dojo.telerik.com/OKaS
Also, the filter menu should take up the editor model of the column but it's not always what you want.
Edit
Starting from 2014 Q2 SP1, the template function now receives an object containing "datasource" and "element". In my example, you would have to change the dropdown initialization from "container.kendoDropDownList" to "container.element.kendoDropDownList". The datasource is empty in my example but I'm assuming this can be used to pass the choices to a control without requiring another datasource or to externalize your current. I have not experimented with this feature but I suggest you do before taking my sample blindly.