Spent more than 3 hours trying to make UpdatePanel to work.
Everything has been done but still does not work.
At last I searched "UpdatePanel not working" in Google, got the solution from Scott Gu.
remove xhtmlConformance mode="Legacy" in web.config file.
http://weblogs.asp.net/scottgu/archive/2006/12/10/gotcha-don-t-use-xhtmlconformance-mode-legacy-with-asp-net-ajax.aspx
I hope I searched in Google at the very first moment when I met the problem.