Please, open the web.config file and look for this line:
The xhtmlConformance element is usually added when an application is migrated from VS 2003 and unfortunately it is not compatible with the ASP.NET AJAX extensions (see http://weblogs.asp.net/scottgu/archive/2006/12/10/gotcha-don-t-use-xhtmlconformance-mode-legacy-with-asp-net-ajax.aspx
). Remove it and see if the dialogs problem is fixed.
All the best,
the Telerik team
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