<xhtmlConformance mode="Transitional" />

that was my problem, thanks very much. All is good now. To the guy who posted this first, your missing your triggers in your first post.

Here's how I got AJAX working without atlas also installed.

Step 1. Drop Microsoft.Web.Extensions.dll in your bin directory.

If you read the release notes carefully it's says dropping the Atlas DLL in your bin directory is no longer supported, not the AJAX DLL. And just because it is not supported does not mean it will not work. :)

Step 2. Modify Existing Elements in Web.Config

Change <xhtmlConformance mode="Legacy"/> to <xhtmlConformance mode="Transitional"/>

Step 3. Add the items in Red to your Web.Config, Notice they are different from the previous post using the atlas dlls. You could also just look at the web.config that is created when you create a new AJAX project and copy entries from that.

<configuration>
  <!-- register local configuration handlers -->
  <configSections>
    <sectionGroup name="dotnetnuke">
      <!-- the requirePermission attribute will cause a syntax warning - please ignore - it is required for Medium Trust support-->
      <section name="data" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
      <section name="logging" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
      <section name="scheduling" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
      <section name="htmlEditor" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
      <section name="navigationControl" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
      <section name="searchIndex" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
      <section name="searchDataStore" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
      <section name="friendlyUrl" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
      <section name="caching" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
      <section name="authentication" requirePermission="false" type="DotNetNuke.Framework.Providers.ProviderConfigurationHandler, DotNetNuke"/>
    </sectionGroup>
    <sectionGroup name="microsoft.web" type="Microsoft.Web.Configuration.MicrosoftWebSectionGroup, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35">
      <sectionGroup name="scripting" type="Microsoft.Web.Configuration.ScriptingSectionGroup, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35">
        <sectionGroup name="webServices" type="Microsoft.Web.Configuration.ScriptingWebServicesSectionGroup, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35">
          <section name="jsonSerialization" type="Microsoft.Web.Configuration.ScriptingJsonSerializationSection, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" requirePermission="false"/>
          <section name="profileService" type="Microsoft.Web.Configuration.ScriptingProfileServiceSection, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" requirePermission="false"/>
          <section name="authenticationService" type="Microsoft.Web.Configuration.ScriptingAuthenticationServiceSection, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" requirePermission="false"/>
        </sectionGroup>
      </sectionGroup>
    </sectionGroup>
  </configSections>
  <connectionStrings>
    <add
      name="SiteSqlServer"
      connectionString="Not Posting For Security Reason
      providerName="System.Data.SqlClient" />
  </connectionStrings>
  <appSettings>
    <add key="pnetTServices" value="PNetTWebServices.PNetTServicesProxy" />
    <add key="pNetTServicesProxyUrl" value="Not Posting For Security Reaons" />
    <add key="SiteSqlServer" value="Not Posting for security reasons>
    <add key="InstallTemplate" value="DotNetNuke.install.config" />
    <!--  Alternative Install Templates (included in package)
    <add key="InstallTemplate" value="Club.install.config" />
    <add key="InstallTemplate" value="Personal.install.config" />
    <add key="InstallTemplate" value="SmallBusiness.install.config" />
    -->
    <add key="AutoUpgrade" value="true" />
    <add key="InstallMemberRole" value="true" />
    <add key="ShowMissingKeys" value="false" />
    <add key="EnableWebFarmSupport" value="false" />
    <add key="EnableCachePersistence" value="false"/>
    <add key="InstallationDate" value="1/23/2006" />
  </appSettings>
  <system.codedom>
    <compilers>
      <compiler
        language="vb"
        type="Microsoft.VisualBasic.VBCodeProvider, System, Version=2.0.0.0, Culture=neutral, PublicKeyToken=B77A5C561934E089"
        extension=".VB" />
    </compilers>
  </system.codedom>
  <system.web>
    <machineKey validationKey="Not Posting this either" decryptionKey="or this decryption="or this" validation="or this" />
    <!-- HttpModules for Common Functionality -->
    <httpModules>
      <!-- add name="Authentication" type="DotNetNuke.HttpModules.AuthenticationModule, DotNetNuke.HttpModules.Authentication" / -->
      <add name="UrlRewrite" type="DotNetNuke.HttpModules.UrlRewriteModule, DotNetNuke.HttpModules.UrlRewrite"/>
      <add name="Exception" type="DotNetNuke.HttpModules.ExceptionModule, DotNetNuke.HttpModules.Exception"/>
      <add name="UsersOnline" type="DotNetNuke.HttpModules.UsersOnlineModule, DotNetNuke.HttpModules.UsersOnline"/>
      <add name="DNNMembership" type="DotNetNuke.HttpModules.DNNMembershipModule, DotNetNuke.HttpModules.DNNMembership"/>
      <add name="Personalization" type="DotNetNuke.HttpModules.PersonalizationModule, DotNetNuke.HttpModules.Personalization"/>
      <add name="WebResourceCompression" type="Microsoft.Web.Handlers.WebResourceCompressionModule, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
      <add name="ScriptModule" type="Microsoft.Web.UI.ScriptModule, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
    </httpModules>
    <!-- This is for FTB 3.0 support -->
    <httpHandlers>
      <add
        verb="GET"
        path="FtbWebResource.axd"
        type="FreeTextBoxControls.AssemblyResourceHandler, FreeTextBox"/>
    </httpHandlers>
    <!-- set code access security trust level - this is generally set in the machine.config
    <trust level="Medium" originUrl="http://localhost/.*" />
     -->
    <!-- set debugmode to false for running application -->
    <compilation debug="false" strict="false">
      <buildProviders>
        <remove extension=".resx"/>
        <remove extension=".resources"/>
      </buildProviders>
      <assemblies>
        <add assembly="Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
        <add assembly="Microsoft.VisualBasic, Version=8.0.0.0, Culture=neutral, PublicKeyToken=B03F5F7F11D50A3A"/>
        <add assembly="System.DirectoryServices, Version=2.0.0.0, Culture=neutral, PublicKeyToken=B03F5F7F11D50A3A"/>
        <add assembly="System.Design, Version=2.0.0.0, Culture=neutral, PublicKeyToken=B03F5F7F11D50A3A"/>
        <add assembly="System.Management, Version=2.0.0.0, Culture=neutral, PublicKeyToken=B03F5F7F11D50A3A"/>
      </assemblies>
      <!-- register your app_code subfolders to generate granular assemblies during compilation
      <codeSubDirectories>
         <add directoryName="sub-directory name"/>
      </codeSubDirectories>
      -->
    </compilation>
    <!-- permits errors to be displayed for remote clients -->
    <customErrors mode="Off"/>
    <!-- Forms or Windows authentication -->
    <authentication mode="Forms">
      <forms name=".DOTNETNUKE" protection="All" timeout="60"/>
    </authentication>
    <!--
      <identity impersonate="true"/>
      <authentication mode="Windows">
      </authentication>
  -->
    <!-- allow large file uploads -->
    <httpRuntime useFullyQualifiedRedirectUrl="true" maxRequestLength="8192" requestLengthDiskThreshold="12192000" executionTimeout="999"/>
    <httpCookies httpOnlyCookies="true" requireSSL="false" domain="" />
    <!--  GLOBALIZATION
  This section sets the globalization settings of the application.
  Utf-8 is not supported on Netscape 4.x
  If you need netscape compatiblity leave iso-8859-1.
  UTF-8 is recommended for complex languages
  -->
    <globalization
      culture="en-US"
      uiCulture="en"
      requestEncoding="UTF-8"
      responseEncoding="UTF-8"
      fileEncoding="UTF-8"/>
    <!--<globalization culture="en-US" uiCulture="en"  fileEncoding="iso-8859-1" requestEncoding="iso-8859-1" responseEncoding="iso-8859-1"/>-->
    <!-- page level options -->
    <pages validateRequest="false" enableViewStateMac="true" enableEventValidation="false">
      <namespaces>
        <add namespace="System.ComponentModel"/>
        <add namespace="System.Data"/>
        <add namespace="System.Data.SqlClient"/>
        <add namespace="System.Drawing"/>
        <add namespace="Microsoft.VisualBasic"/>
        <add namespace="System.Globalization"/>
        <add namespace="DotNetNuke.Services.Localization"/>
        <add namespace="DotNetNuke.Entities.Users"/>
        <add namespace="DotNetNuke"/>
        <add namespace="DotNetNuke.Common"/>
        <add namespace="DotNetNuke.Data"/>
        <add namespace="DotNetNuke.Framework"/>
        <add namespace="DotNetNuke.Modules"/>
        <add namespace="DotNetNuke.Security"/>
        <add namespace="DotNetNuke.Services"/>
        <add namespace="DotNetNuke.UI"/>
        <add namespace="DotNetNuke.Entities.Portals"/>
        <add namespace="DotNetNuke.Common.Utilities"/>
        <add namespace="DotNetNuke.Services.Exceptions"/>
        <add namespace="DotNetNuke.Entities.Tabs"/>
      </namespaces>
        <controls>
          <add tagPrefix="asp" namespace="Microsoft.Web.UI" assembly="Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
          <add tagPrefix="asp" namespace="Microsoft.Web.UI.Controls" assembly="Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
        </controls>
        <tagMapping>
          <add tagType="System.Web.UI.WebControls.CompareValidator" mappedTagType="Microsoft.Web.UI.Compatibility.CompareValidator, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
          <add tagType="System.Web.UI.WebControls.CustomValidator" mappedTagType="Microsoft.Web.UI.Compatibility.CustomValidator, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
          <add tagType="System.Web.UI.WebControls.RangeValidator" mappedTagType="Microsoft.Web.UI.Compatibility.RangeValidator, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
          <add tagType="System.Web.UI.WebControls.RegularExpressionValidator" mappedTagType="Microsoft.Web.UI.Compatibility.RegularExpressionValidator, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
          <add tagType="System.Web.UI.WebControls.RequiredFieldValidator" mappedTagType="Microsoft.Web.UI.Compatibility.RequiredFieldValidator, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
          <add tagType="System.Web.UI.WebControls.ValidationSummary" mappedTagType="Microsoft.Web.UI.Compatibility.ValidationSummary, Microsoft.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
        </tagMapping>

    </pages>
    <xhtmlConformance mode="Transitional"/> <!--this was step two-->

That's all I did to get it to work.

If you did all of this and it doesn't work post the code for your ascx you may still be missing your triggers or I might see something. The code in your first post would not work because there are not any triggers on the updatepanel.