Your ItemDataBound handler should look like :
protected void dl_ItemDataBound(object sender, DataListItemEventArgs e)
{
if (e.Item.ItemType == ListItemType.Item || e.Item.ItemType == ListItemType.AlternatingItem)
{
var myDropDownList = e.Item.FindControl("YourDropDownListID") as DropDownList;
int currentItemID = int.Parse(this.dl.DataKeys[e.Item.ItemIndex].ToString());
myDropDownList.DataSource = GetDDLDataSource(currentItemID);
myDropDownList.DataBind();
}
}