HOWTO:What is the best way to place a DropDown list in a grid cell?

You have to assign a ValueList to the column.

Example:
void ultraGrid1_InitializeLayout(object sender, InitializeLayoutEventArgs e)
{
    foreach( UltraGridColumn column in e.Layout.Bnds[0].Columns )
    {
        string key = column.Key;

        switch ( key )
        {
            case "myColumn":
                ValueList vl = new ValueList();
                vl.ValueListItems.Add( 1, "One" );
                vl.ValueListItems.Add( 2, "Two" );
                vl.ValueListItems.Add( 3, "Three" );
                column.ValueList = vl;
            break;
        }
    }
}