Setup

Setup your environment

Install binaries

Configure Visual Studio 2005 and Visual Web Developer

Create a new web site from the ASP.NET AJAX web site template by opening the "File" menu, clicking "New", "Web Site...", and picking "ASP.NET AJAX Web Site" under "My Templates"
Right-click on the Toolbox and select "Add Tab", and add a tab called "AJAX Control Toolkit"
Inside that tab, right-click on the Toolbox and select "Choose Items..."
When the "Choose Toolbox Items" dialog appears, click the "Browse..." button. Navigate to the folder where you installed the ASP.NET AJAX Control Toolkit package. You will find a folder called "SampleWebSite", and under that another folder called "bin". Inside that folder, select "AjaxControlToolkit.dll" and click OK. Click OK again to close the Choose Items Dialog.
You can now use the included sample controls in your web sites!

Install the "AJAX Control Extender"

Note that the "AJAX Control Extender" is for building extenders and controls, not web sites, and therefore does not work with Visual Web Developer - it is for use with Visual C#, Visual Basic, or Visual Studio
In the folder where you installed the AJAX Control Toolkit package, you will find a folder called "AjaxControlExtender" with a file called "AjaxControlExtender.vsi" inside it - double-click AjaxControlExtender.vsi to install it
Choose which templates you would like to install (it is recommended to install all templates), then click "Next", then "Yes" to allow the unsigned content (note: as a public project, this content can't be signed by Microsoft), then "Finish"
You have now installed the templates are ready to create your own Toolkit-based web site or ASP.NET AJAX Extenders!