When I enable html encoding on a grid field and send html from the server, it just shows up as html encoding.
For example: <strong> This should be bold </strong>
Shows up in the field as: <strong> This should be bold </strong>
Maybe I am not understanding how this should work but this is the example given in the documentation.
I think that the key here is that "Enable HTML Encoding" corresponds to the "column.encoded" option in the Kendo UI Grid:
If you look at the generated code for controller.js, you can see the setting of the encoded property.
When encoded is true, the value of the column is HTML-encoded to escape the HTML tags.
When encoded is false, the value is not encoded and then the web browser would interpret the values.
I hope this helps.