On a recent web application migration from ASP.NET 1.1 to 3.5, the AJAX Tookit had some errors where the Update Panel control was performing a full page postback.

The culprit was this line in the web.config file:

<xhtmlConformance mode="Legacy"/>

By removing the above line in the web.config file, your HTML output standards compliant and will cause the HTML from your server controls to be "well formed" - meaning open and close tag elements always match.