Hi All,
Some of you will be pleased to know that I have produced a workaround to address the issue of WebPart Drag and Drop (and verb popup menus) not operating correctly inside of an update panel.
It seems that the functionality being shown off on channel 9 (using Ajax CTP) was only to tease us into thinking that this would be possible in Ajax 1.0 (the final release).
Here are the details of the work around:
AJAX 1.0 Compatible WebPartManager (Workaround)
1. The Problem
ASP.NET Web Parts Drag and Drop facility and Drop down verbs menu does not operate correctly inside of an Microsoft AJAX 1.0 UpdatePanel.
2. Why is doesn't work
The WebPartManager is responsible for registering an include and start up script. This script provides Web Parts and zones with various client side functionality including drag and drop and drop down verb menus.
When a control is placed inside of an Update Panel, the script is rendered and ran on the first render, but not on subsequent renders. Due to this, the client side functionality fails.
3. The Solution
The solution is simple. Inherit the WebPartManager, override the RenderClientScript Method and render the client scripts using the System.Web.UI.ScriptManager instead of the System.Web.UI.ClientScriptManager. The System.Web.UI.ScriptManager informs Ajax of the registered client scripts and ensures that they are rendered out and executed whenever an UpdatePanel is refreshed.
4. Using the AJAX 1.0 Compatible WebPartManager
i. Download the Solution (includes source code)
ii. Compile the project and add a reference to it in your web project.
iii. Add the following Tag Mapping to the specified section of your web.config:
<configuration>
<system.web>
<pages>
<tagMapping>
<add tagType="System.Web.UI.WebControls.WebParts.WebPartManager"
mappedTagType="Sample.Web.UI.WebParts.WebPartManager, Sample.Web.UI.WebParts"/>
</tagMapping>
</pages>
</system.web>
</configuration>
iv. Use Web Parts as normal (There is no need to replace the System.Web.UI.WebControls.WebParts.WebPartManager with Sample.Web.UI.WebParts.WebPartManager as the above mapping will take care of this).
Enjoy! 
David