Serge Zab's answer was exactly what I was looking for. Being a die hard VB programmer I ported it to this VB module:
'based on Serge Zab's answer on http://stackoverflow.com/questions/607188/support-for-optgroup-in-dropdownlist-net-mvc
Imports System.Collections
Imports System.Collections.Generic
Imports System.Globalization
Imports System.Linq
Imports System.Linq.Expressions
Imports System.Text
Imports System.Web
Imports System.Web.Mvc
Imports System.Web.Routing
Public Class GroupedSelectListItem
    Inherits SelectListItem
    Public Property GroupKey() As String
        Get
            Return m_GroupKey
        End Get
        Set(value As String)
            m_GroupKey = Value
        End Set
    End Property
    Private m_GroupKey As String
    Public Property GroupName() As String
        Get
            Return m_GroupName
        End Get
        Set(value As String)
            m_GroupName = Value
        End Set
    End Property
    Private m_GroupName As String
End Class
Public Module HtmlHelpers
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupList(htmlHelper As HtmlHelper, name As String) As MvcHtmlString
        Return DropDownListHelper(htmlHelper, name, Nothing, Nothing, Nothing)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupList(htmlHelper As HtmlHelper, name As String, selectList As IEnumerable(Of GroupedSelectListItem)) As MvcHtmlString
        Return DropDownListHelper(htmlHelper, name, selectList, Nothing, Nothing)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupList(htmlHelper As HtmlHelper, name As String, optionLabel As String) As MvcHtmlString
        Return DropDownListHelper(htmlHelper, name, Nothing, optionLabel, Nothing)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupList(htmlHelper As HtmlHelper, name As String, selectList As IEnumerable(Of GroupedSelectListItem), htmlAttributes As IDictionary(Of String, Object)) As MvcHtmlString
        Return DropDownListHelper(htmlHelper, name, selectList, Nothing, htmlAttributes)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupList(htmlHelper As HtmlHelper, name As String, selectList As IEnumerable(Of GroupedSelectListItem), htmlAttributes As Object) As MvcHtmlString
        Return DropDownListHelper(htmlHelper, name, selectList, Nothing, New RouteValueDictionary(htmlAttributes))
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupList(htmlHelper As HtmlHelper, name As String, selectList As IEnumerable(Of GroupedSelectListItem), optionLabel As String) As MvcHtmlString
        Return DropDownListHelper(htmlHelper, name, selectList, optionLabel, Nothing)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupList(htmlHelper As HtmlHelper, name As String, selectList As IEnumerable(Of GroupedSelectListItem), optionLabel As String, htmlAttributes As IDictionary(Of String, Object)) As MvcHtmlString
        Return DropDownListHelper(htmlHelper, name, selectList, optionLabel, htmlAttributes)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupList(htmlHelper As HtmlHelper, name As String, selectList As IEnumerable(Of GroupedSelectListItem), optionLabel As String, htmlAttributes As Object) As MvcHtmlString
        Return DropDownListHelper(htmlHelper, name, selectList, optionLabel, New RouteValueDictionary(htmlAttributes))
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupListFor(Of TModel, TProperty)(htmlHelper As HtmlHelper(Of TModel), expression As Expression(Of Func(Of TModel, TProperty)), selectList As IEnumerable(Of GroupedSelectListItem)) As MvcHtmlString
        ' optionLabel 
        ' htmlAttributes 
        Return DropDownGroupListFor(htmlHelper, expression, selectList, Nothing, Nothing)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupListFor(Of TModel, TProperty)(htmlHelper As HtmlHelper(Of TModel), expression As Expression(Of Func(Of TModel, TProperty)), selectList As IEnumerable(Of GroupedSelectListItem), htmlAttributes As Object) As MvcHtmlString
        ' optionLabel 
        Return DropDownGroupListFor(htmlHelper, expression, selectList, Nothing, New RouteValueDictionary(htmlAttributes))
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupListFor(Of TModel, TProperty)(htmlHelper As HtmlHelper(Of TModel), expression As Expression(Of Func(Of TModel, TProperty)), selectList As IEnumerable(Of GroupedSelectListItem), htmlAttributes As IDictionary(Of String, Object)) As MvcHtmlString
        ' optionLabel 
        Return DropDownGroupListFor(htmlHelper, expression, selectList, Nothing, htmlAttributes)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupListFor(Of TModel, TProperty)(htmlHelper As HtmlHelper(Of TModel), expression As Expression(Of Func(Of TModel, TProperty)), selectList As IEnumerable(Of GroupedSelectListItem), optionLabel As String) As MvcHtmlString
        ' htmlAttributes 
        Return DropDownGroupListFor(htmlHelper, expression, selectList, optionLabel, Nothing)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupListFor(Of TModel, TProperty)(htmlHelper As HtmlHelper(Of TModel), expression As Expression(Of Func(Of TModel, TProperty)), selectList As IEnumerable(Of GroupedSelectListItem), optionLabel As String, htmlAttributes As Object) As MvcHtmlString
        Return DropDownGroupListFor(htmlHelper, expression, selectList, optionLabel, New RouteValueDictionary(htmlAttributes))
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Public Function DropDownGroupListFor(Of TModel, TProperty)(htmlHelper As HtmlHelper(Of TModel), expression As Expression(Of Func(Of TModel, TProperty)), selectList As IEnumerable(Of GroupedSelectListItem), optionLabel As String, htmlAttributes As IDictionary(Of String, Object)) As MvcHtmlString
        If expression Is Nothing Then
            Throw New ArgumentNullException("expression")
        End If
        Return DropDownListHelper(htmlHelper, ExpressionHelper.GetExpressionText(expression), selectList, optionLabel, htmlAttributes)
    End Function
    Private Function DropDownListHelper(htmlHelper As HtmlHelper, expression As String, selectList As IEnumerable(Of GroupedSelectListItem), optionLabel As String, htmlAttributes As IDictionary(Of String, Object)) As MvcHtmlString
        ' allowMultiple 
        Return SelectInternal(htmlHelper, optionLabel, expression, selectList, False, htmlAttributes)
    End Function
    ' Helper methods
    <System.Runtime.CompilerServices.Extension> _
    Private Function GetSelectData(htmlHelper As HtmlHelper, name As String) As IEnumerable(Of GroupedSelectListItem)
        Dim o As Object = Nothing
        If htmlHelper.ViewData IsNot Nothing Then
            o = htmlHelper.ViewData.Eval(name)
        End If
        If o Is Nothing Then
            Throw New InvalidOperationException([String].Format(CultureInfo.CurrentCulture, "Missing Select Data", name, "IEnumerable<GroupedSelectListItem>"))
        End If
        Dim selectList As IEnumerable(Of GroupedSelectListItem) = TryCast(o, IEnumerable(Of GroupedSelectListItem))
        If selectList Is Nothing Then
            Throw New InvalidOperationException([String].Format(CultureInfo.CurrentCulture, "Wrong Select DataType", name, o.[GetType]().FullName, "IEnumerable<GroupedSelectListItem>"))
        End If
        Return selectList
    End Function
    Friend Function ListItemToOption(item As GroupedSelectListItem) As String
        Dim builder As New TagBuilder("option") With { _
             .InnerHtml = HttpUtility.HtmlEncode(item.Text) _
        }
        If item.Value IsNot Nothing Then
            builder.Attributes("value") = item.Value
        End If
        If item.Selected Then
            builder.Attributes("selected") = "selected"
        End If
        Return builder.ToString(TagRenderMode.Normal)
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Private Function SelectInternal(htmlHelper__1 As HtmlHelper, optionLabel As String, name As String, selectList As IEnumerable(Of GroupedSelectListItem), allowMultiple As Boolean, htmlAttributes As IDictionary(Of String, Object)) As MvcHtmlString
        name = htmlHelper__1.ViewContext.ViewData.TemplateInfo.GetFullHtmlFieldName(name)
        If [String].IsNullOrEmpty(name) Then
            Throw New ArgumentException("Null Or Empty", "name")
        End If
        Dim usedViewData As Boolean = False
        ' If we got a null selectList, try to use ViewData to get the list of items.
        If selectList Is Nothing Then
            selectList = htmlHelper__1.GetSelectData(name)
            usedViewData = True
        End If
        Dim defaultValue As Object = If((allowMultiple), htmlHelper__1.GetModelStateValue(name, GetType(String())), htmlHelper__1.GetModelStateValue(name, GetType(String)))
        ' If we haven't already used ViewData to get the entire list of items then we need to
        ' use the ViewData-supplied value before using the parameter-supplied value.
        If Not usedViewData Then
            If defaultValue Is Nothing Then
                defaultValue = htmlHelper__1.ViewData.Eval(name)
            End If
        End If
        If defaultValue IsNot Nothing Then
            Dim defaultValues As IEnumerable = If((allowMultiple), TryCast(defaultValue, IEnumerable), New String() {defaultValue})
            Dim values As IEnumerable(Of String) = From value In defaultValues Select (Convert.ToString(value, CultureInfo.CurrentCulture))
            Dim selectedValues As New HashSet(Of String)(values, StringComparer.OrdinalIgnoreCase)
            Dim newSelectList As New List(Of GroupedSelectListItem)()
            For Each item As GroupedSelectListItem In selectList
                item.Selected = If((item.Value IsNot Nothing), selectedValues.Contains(item.Value), selectedValues.Contains(item.Text))
                newSelectList.Add(item)
            Next
            selectList = newSelectList
        End If
        ' Convert each ListItem to an <option> tag
        Dim listItemBuilder As New StringBuilder()
        ' Make optionLabel the first item that gets rendered.
        If optionLabel IsNot Nothing Then
            listItemBuilder.AppendLine(ListItemToOption(New GroupedSelectListItem() With { _
                 .Text = optionLabel, _
                 .Value = [String].Empty, _
                 .Selected = False _
            }))
        End If
        For Each group As Object In selectList.GroupBy(Function(i) i.GroupKey)
            Dim groupName As String = selectList.Where(Function(i) i.GroupKey = group.Key).[Select](Function(it) it.GroupName).FirstOrDefault()
            listItemBuilder.AppendLine(String.Format("<optgroup label=""{0}"" value=""{1}"">", groupName, group.Key))
            For Each item As GroupedSelectListItem In group
                listItemBuilder.AppendLine(ListItemToOption(item))
            Next
            listItemBuilder.AppendLine("</optgroup>")
        Next
        Dim tagBuilder As New TagBuilder("select") With { _
             .InnerHtml = listItemBuilder.ToString() _
        }
        TagBuilder.MergeAttributes(htmlAttributes)
        ' replaceExisting 
        TagBuilder.MergeAttribute("name", name, True)
        TagBuilder.GenerateId(name)
        If allowMultiple Then
            TagBuilder.MergeAttribute("multiple", "multiple")
        End If
        ' If there are any errors for a named field, we add the css attribute.
        Dim modelState As ModelState = Nothing
        If htmlHelper__1.ViewData.ModelState.TryGetValue(name, modelState) Then
            If modelState.Errors.Count > 0 Then
                TagBuilder.AddCssClass(HtmlHelper.ValidationInputCssClassName)
            End If
        End If
        Return MvcHtmlString.Create(TagBuilder.ToString())
    End Function
    <System.Runtime.CompilerServices.Extension> _
    Friend Function GetModelStateValue(helper As HtmlHelper, key As String, destinationType As Type) As Object
        Dim modelState As ModelState = Nothing
        If helper.ViewData.ModelState.TryGetValue(key, modelState) Then
            If modelState.Value IsNot Nothing Then
                ' culture 
                Return modelState.Value.ConvertTo(destinationType, Nothing)
            End If
        End If
        Return Nothing
    End Function
End Module