Just checking, did you click on the smart tag on the ScriptManager to register it? I always forget to do that and it often causes trouble for me. ;D
Otherwise, be sure that you have the Register item towards the top of the aspx for Telerik.Web.UI and that your web.config has been properly updated with the Telerik handlers.
You can also check out this thread
, contains a lot of discussion regarding Telerik controls, the AJAX toolkit, and fixing the Sys error.