After recently converting a web app to the 3.5 framework, I found that the pages that used the AjaxControlToolkit no longer worked. With a little research, I found that there is a new release of the toolkit that needs to be used with 3.5 apps. You can download the assembly by going to the following web page and selecting the link that reads "AjaxControlToolkit-Framework3.5.zip". Happy coding :)
http://www.codeplex.com/AtlasControlToolkit/Release/ProjectReleases.aspx?ReleaseId=4923