By design, this is not going to work. The UpdatePanel avoids page flicker on postbacks. That is, when a page posts back to itself. This work because it only replaces the piece if HTML that has changed by the postback (the contents of the UpdatePanel's ContentTemplate).
When you request a new page you don't post back, but issue a GET request on a new ASPX page. The UpdatePanel has no way of dealing with this and as such you always get "page flicker". You can overcome this in IE by using some meta tags as explained here: http://imar.spaanjaars.com/314/smoot...ge-transitions
Note, this only works in IE. Note 2: not sure if this still works in recent versions of IE; haven't used it in a while.
Finally, you can add the ScriptManager to the MasterPage as the first control in the form. This way, it's available to all pages. This does not solve the page flicker issue; I just mention it here for other cases where you need a ScriptManager control.