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Based on my knowledge, all the File Upload control which based on the RFC1867 ( Form-based File Upload in HTML. (http://www.ietf.org/rfc/rfc1867.txt) ) need a full postback, and cannot work in an UpdatePanel.
 
There are many way to make a "AJAX" file upload, please check:

http://www.muraton.net/post/2008/01/FileUpload-and-Ajax-UpdatePanel.aspx

http://mobiledeveloper.wordpress.com/2007/05/15/file-upload-with-aspnet-ajax-updatepanel/

http://forums.asp.net/t/1207035.aspx

http://geekswithblogs.net/ranganh/archive/2008/04/01/file-upload-in-updatepanel-asp.net-ajax.aspx

http://www.muraton.net/post/2008/01/FileUpload-and-Ajax-UpdatePanel.aspx

http://mobiledeveloper.wordpress.com/2007/05/15/file-upload-with-aspnet-ajax-updatepanel/

http://aspalliance.com/1442_Building_AJAX_Enabled_File_Uploading_System_with_Progress_Bar_Using_ASPNET_20.all

http://geekswithblogs.net/rashid/archive/2007/08/01/Create-An-Ajax-Style-File-Upload.aspx

http://msmvps.com/blogs/luisabreu/archive/2006/12/14/uploading-files-without-a-full-postback.aspx

http://blogs.infragistics.com/blogs/tony_lombardo/archive/2007/04/09/file-uploads-where-s-the-ajax.aspx

http://www.codeproject.com/KB/aspnet/AJAXUpload.aspx

http://www.codeplex.com/fileuploadajax

http://geekswithblogs.net/ranganh/archive/2008/04/01/file-upload-in-updatepanel-asp.net-ajax.aspx

Thanks.

Sincerely,
Lance Zhang
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