How to setup MOSS 2007 to use ASP.NET 3.5 with AJAX Extensions

Here are two links that i have found helpful

This is a great explination of what needs to change:

http://www.telerik.com/help/aspnet-ajax/moss-install-aspnet-ajax-35.html

The only thing to note is that the final section on the system.web.extensions is that you may already have a copy of this in your config. 

So I would recommend taking the sample web.config from the project below as a starting place (with the artcile above explaining what is going on)

http://www.codeplex.com/SL4SP/Release/ProjectReleases.aspx?ReleaseId=19961