Apparently this issue is related to the AjaxSettings of the manager. Please try including the RadToolBar1 as an updated control on RadGrid1 callback and see if this helps to resolve the described problem. Otherwise the toolbar will not be updated.
However, I followed your scenario and prepared a sample project which demonstrates how this can be achieved. I am attaching my test page for your reference. Please open the RadAjaxManager Editor in design mode and see if everything is checked as expected.
Give it a try and let me know if it helps or you need additional assistance.
the Telerik team
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