Since ASP.NET AJAX was released last week and the source yesterday I thought i would post a couple links I found for adding this functionality to existing visual studio web projects
http://codebetter.com/blogs/jay.kimble/archive/2006/05/19/144952.aspx
http://community.rampgroup.com/blogs/ramp_technology_group/archive/2006/06/14/82.aspx
found a video as well

Since The name space has changed a little here is my update.

add system.web.extensions reference to project.
in web.config add
under <configuration> add
 

<configSections>
    <sectionGroup name="system.web.extensions" type="System.Web.Configuration.SystemWebExtensionsSectionGroup, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35">
      <sectionGroup name="scripting" type="System.Web.Configuration.ScriptingSectionGroup, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35">
          <section name="scriptResourceHandler" type="System.Web.Configuration.ScriptingScriptResourceHandlerSection, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" requirePermission="false" allowDefinition="MachineToApplication"/>
        <sectionGroup name="webServices" type="System.Web.Configuration.ScriptingWebServicesSectionGroup, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35">
          <section name="jsonSerialization" type="System.Web.Configuration.ScriptingJsonSerializationSection, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" requirePermission="false" allowDefinition="Everywhere" />
          <section name="profileService" type="System.Web.Configuration.ScriptingProfileServiceSection, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" requirePermission="false" allowDefinition="MachineToApplication" />
          <section name="authenticationService" type="System.Web.Configuration.ScriptingAuthenticationServiceSection, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" requirePermission="false" allowDefinition="MachineToApplication" />
        </sectionGroup>
      </sectionGroup>
    </sectionGroup>
  </configSections>

under system.web add

    <pages>
      <controls>
        <add tagPrefix="asp" namespace="System.Web.UI" assembly="System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
      </controls>
    </pages>
    <httpHandlers>
      <remove verb="*" path="*.asmx"/>
        <add verb="*" path="*.asmx" validate="false" type="System.Web.Script.Services.ScriptHandlerFactory, System.Web.Extensions, Version=1.0.61025.0,Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
        <add verb="*" path="*_AppService.axd" validate="false" type="System.Web.Script.Services.ScriptHandlerFactory, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
        <add verb="GET,HEAD" path="ScriptResource.axd" type="System.Web.Handlers.ScriptResourceHandler, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" validate="false"/>
    </httpHandlers>
    <httpModules>
      <add name="ScriptModule" type="System.Web.Handlers.ScriptModule, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
    </httpModules>    

   
under system.web><compilation>add

      <assemblies>
        <add assembly="System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
      </assemblies>     

after system.web add
</system.web>
 

<system.web.extensions>
    <scripting>
      <webServices>
      <!-- Uncomment this line to customize maxJsonLength and add a custom converter -->
      <!--
      <jsonSerialization maxJsonLength="500">
        <converters>
          <add name="ConvertMe" type="Acme.SubAcme.ConvertMeTypeConverter"/>
        </converters>
      </jsonSerialization>
      -->
      <!-- Uncomment this line to enable the authentication service. Include requireSSL="true" if appropriate. -->
      <!--
        <authenticationService enabled="true" requireSSL = "true|false"/>
      -->

      <!-- Uncomment these lines to enable the profile service. To allow profile properties to be retrieved
           and modified in ASP.NET AJAX applications, you need to add each property name to the readAccessProperties and
           writeAccessProperties attributes. -->
      <!--
      <profileService enabled="true"
                      readAccessProperties="propertyname1,propertyname2"
                      writeAccessProperties="propertyname1,propertyname2" />
      -->
      </webServices>
      <!--
      <scriptResourceHandler enableCompression="true" enableCaching="true" />
      -->
    </scripting>
  </system.web.extensions>
   <system.webServer>
    <validation validateIntegratedModeConfiguration="false"/>
    <modules>
      <add name="ScriptModule" preCondition="integratedMode" type="System.Web.Handlers.ScriptModule, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
    </modules>
    <handlers>
      <remove name="WebServiceHandlerFactory-Integrated" />
      <add name="ScriptHandlerFactory" verb="*" path="*.asmx" preCondition="integratedMode"
           type="System.Web.Script.Services.ScriptHandlerFactory, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
      <add name="ScriptHandlerFactoryAppServices" verb="*" path="*_AppService.axd" preCondition="integratedMode"
           type="System.Web.Script.Services.ScriptHandlerFactory, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
      <add name="ScriptResource" preCondition="integratedMode" verb="GET,HEAD" path="ScriptResource.axd" type="System.Web.Handlers.ScriptResourceHandler, System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" />
    </handlers>
  </system.webServer>

This should get you up and running.

Open your aspx page in design mode and in your toolbox window you should see AJAX Extensions. 
Drag the scriptManager control on to the page so that it is the very first control.
Then place an update panel any where and drag your control into it.