In this post, I mentioned tearing my hear out because I couldn't get a gridview to work right with the update panel. Today I decided to just start on a fresh web form and everything seems to be working fine.
I did learn that an updatepanel without any triggers will consume any server-side event that fires inside of it (ie, to get paging and sorting working you don't need to explicitly specify triggers to handle those events). I also learned that (and this isn't related to Atlas) a gridview's page and sort events also fire off RowCommand events...which I guess make sense since the header is a “row” and the pager thing is also a “row”.
Still trying to figure out the updatePanel inside of a userControl thing figured out, I'll keep you posted.