One of the key configurations to get AJAX working on IIS 7.0 [Windows Server 2008 | Vista]
This should be added within the web.config of the SharePoint site.
The <system.webserver> element contains configuration settings used by Microsoft Internet Information Server (IIS) 7.0.
The following example shows the <system.webserver> element for ASP.NET AJAX. Add this section to the existing Web.config file as a child of the <configuration> element.
<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-ISAPI-2.0"/>
<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>