I've been using the telerik controls in a custom SharePoint application and decided to go with the latest .NET 3.5 ajax implementation. There are already a couple of ways to add ASP.NET Ajax support to WSS/MOSS including the "official" way here (requires SP1): http://msdn.microsoft.com/en-us/library/bb861898.aspx which uses the original ASP.NET Ajax released for .NET 2.0 / VS 2005.
To enable .NET 3.5 on my SharePoint web app, I used the 3.5 config feature provided as part of the SharePoint features set on CodePlex: http://www.codeplex.com/features which was started by Scott Hillier.
One oddity I came across after doing this, was that if I customised (unghosted) my masterpage in SharePoint Designer (which contains the ScriptManager control), none of my content pages would load and would throw an exception along the lines of: "The base type 'System.Web.UI.MasterPage' is not allowed for this page".
After doing some digging in the web.config and comparing entries to the eralier "official" guidance, I notcied I had an extra control tag entry in the web.config:
<add tagPrefix="asp" namespace="System.Web.UI.WebControls" assembly="System.Web.Extensions, Version=188.8.131.52, Culture=neutral, PublicKeyToken=31BF3856AD364E35" />
After removing this entry my content pages now load fine when the masterpage had been customised. I have yet to see if there are any other side effects to this, but I'll do a follow up post if I find anything more.