hello.
yep, you're right...scriptmanager will allways insert the panel in xml script even though it's not inserted in the final HTML that is sent to the browser. currently, and in the previous example, the only thing you can do is use the display css style instead of toggling the visibility of the panel (yes, i know that this is not what you wanted to hear...)
btw, can you please add this sample to garbin's unofficial list? it really is a bug in the way that scriptmanager generates the xml...