Instead of setting ItemTemplate, set ItemContainerStyle. Give it a style that sets the title and command properties on the menu.
<MenuItem Header="_Recent Files" ItemsSource="{Binding RecentFiles}">
<MenuItem.ItemContainerStyle>
<Style>
<Setter Property="MenuItem.Header" Value="{Binding FileName}"/>
<Setter Property="MenuItem.Command" Value="{Binding Open}"/>
</Style>
</MenuItem.ItemContainerStyle>
</MenuItem>
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