This article: http://geekswithblogs.net/ranganh/archive/2007/05/16/112525.aspx
will explain the basics of nesting UpdatePanels (which is, essentially, what RadAjax uses). The case here is that we need to trap postbacks and make them partial, which cannot happen with asp:Panel controls, they are not IPostBack controls and there is no way to determine which is the actual control that posted the page, so the end result is an update panel with updateMode=Always.
This means that the entire pnlControlContainer will be disposed if a control inside performs a postback, so the inner RadAjaxPanels cannot help in containing the postback, they only act as nested update panels that cause issues with updating the content.
I am attaching here the page as I ran it and a video that shows the expected behavior. The pnlControlContainer div will always be updated with any postback and update panels around it or inside it are useless. You can see it by examining the network traffic in detail, in my case I used the network tab to show there are no requests (you can ignore the 404s for the image).
the Telerik team
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