I have tried to use the '&' (ampersand) character to declare the Alt shortcut in ToolStripMenuItem.Text but it doesn't work. Is there another kind of declaration?

In fact it works when I add the ToolStripMenuItem to a MenuStrip.Items but it doesn't work when I add a ToolStripMenuItem to ToolStripMenuItem.DropDownItems

Yes, we've reproduced this and are we're tracking it. Look for this to get fixed in future drops.