which Ajax Control Toolkit did you download?
On codeplex (http://ajaxcontroltoolkit.codeplex.com/releases/view/11121)
you can find AjaxControlToolkit.zip which is the Toolkit for .NET Framework 2.0, ASP.NET AJAX 1.0 and Visual Studio 2005.
(As well as AjaxControlToolkit-Framework3.5.zip which is the 2008 release of the AJAX Control Toolkit targets the official release of .NET Framework 3.5 and Visual Studio 2008. ) I'm afraid you chose the latter while you need the first.
Hope this helps.