RadXmlHttpPanel has two modes of operation - one is based on Web Services, and the other is based on ASP.NET 2.0 Callbacks.
I am not sure whether there will be a problem with using ASP.NET Callbacks in the Entity Framework (I do not think there should be). On the other hand, it should be possible to hook the panel to a webservice without a problem.
We just released the Q2 2009 officially, and it contains 2 new demos as well as some improved explanations about the RadXmlHttpPanel control. My suggestion is to revisit the demos available here:
In case there are problems remaining (even when trying with the web service approach) please open a support ticket and send us some more information (e.g. your project or a scaled-down version thereof) for us to examine further.
the Telerik team