Issues with ASP.NET Ajax after upgrading web site to Orcas beta 2?
If that's the case, see following posts
ASP.NET AJAX in .NET 3.5 and VS 2008
http://weblogs.asp.net/scottgu/archive/2007/07/30/asp-net-ajax-in-net-3-5-and-vs-2008.aspx
Upgrading ASP.NET AJAX 1.0 Websites and Web Applications to .NET Framework 3.5
http://blogs.msdn.com/webdevtools/archive/2007/07/28/upgrading-asp-net-ajax-1-0-websites-and-web-applications-to-net-framework-3-5.aspx
You'll find an explanation of the upgrade issue in beta 2 which requires you to do a little Framework switch in VS2008 to get it corrected. Luckily, it's very minor one.
Note: it concerns only web sites, not web application projects. One more good reason to use WAP. :-)