Hi Thomas,
If it works, it works.... ;-)
The reason I advised you to place the UpdateProgress outside the UpdatePanel is that it makes it easier to reuse the same progress for multiple panels. That way, you can have a single UI element that is triggered by different UpdatePanels. In your case, you need the UI closer to (or actually in) the actual panel, which is fine.
Initially, AJAX stood for Asynchronous JavaScript and XML. However, today it doesn't have to by asynchronous, require JavaScript nor has to be based on XML. You could do SVAJ - Synchronous VBScript and JSON ;-) or any other combination. However, for many practical purposes, AJAX comes down to JavaScript. So yes, if you want to dig deeper into AJAX, you certainly need to learn more about JavaScript.
Check out the books section of this site:
http://www.wrox.com/WileyCDA/Section/id-105077.html Wrox has a number of excellent books on JavaScript and on AJAX.
Hope this helps. If not, please let me know.
Cheers,
Imar