ASP.Net 1 and 1.1 did not emit XHTML compliant markup from countless server controls. ASP.Net 2 changed this and defaults to emitting XHTML compliant markup from all controls. Beta testing of ASP.Net 2 showed Microsoft that this could affect certain web apps and to prevent this a xhtmlConformance setting was introduced and added in the conversion to the config file:
<system.web> <xhtmlConformance mode="Legacy" /> </system.web>
If you are having ASP.Net AJAX issues I recommend removing the <xhtmlConformance> section from your web.config file or perhaps set it to Transitional or Strict.
It's also worth checking the framework's web.config file for the setting if you think this is affecting you and the setting isn't in your app's web.config