I installed the 3.5 version of the toolkit about a month ago. Everything was working perfectly. All of the sudden, the controls are not working. If I add a rounded corners extender and run the page, it just doesn't work. These exact pages worked a few days ago. I've tried reinstalling the toolkit and have reinstalled Visual Web Developer 08..but no luck. Any advice?

Unfortunately, I've run into tons of problems with the Ajax Control Toolkit myself.  It does have the disclaimer "AS-IS" b/c it has not been tested and fixed in all scenarios which can leave you grinding your teeth.  It's technically not really finished and supported to work.  I ran into issues with it creating custom web controls and problems with validation controls especially dealing with complex interfaces where there were controls that were children of children.

 Just thought I'd share my experience with you in the complete faith in the toolkit.