This otta be easy. When I run this code, the pnlEditItem shows on the page (isn't hidden) and the popup link does nothing.
<%@ Register Assembly="System.Web.Extensions, Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35" Namespace="System.Web.UI" TagPrefix="ajax" %><%@ Register Assembly="AjaxControlToolkit" Namespace="AjaxControlToolkit" TagPrefix="ajax" %><asp:Content ContentPlaceHolderID="ContentPlaceHolder1" runat="server"><ajax:ScriptManager runat="server"></ajax:ScriptManager><asp:Panel ID="pnlEditItem" runat="server"><asp:UpdatePanel ID="upEditItems" runat="server"><ContentTemplate><asp:Table runat="server"><asp:TableRow><asp:TableCell><asp:TextBox ID="txtItemName" runat="server"></asp:TextBox></asp:TableCell></asp:TableRow><asp:TableRow><asp:TableCell><asp:Button ID="btnSaveItem" runat="server" Text="Save" /></asp:TableCell></asp:TableRow></asp:Table></ContentTemplate></asp:UpdatePanel></asp:Panel><asp:Panel runat="Server" ID="pnlMain"><asp:LinkButton ID="lnkShowMe" Text="Show Me" runat="server"></asp:LinkButton></asp:Panel><ajax:PopupControlExtender ID="popEditProduct" TargetControlID="lnkShowMe" PopupControlID="pnlEditItem" runat="server"></ajax:PopupControlExtender></asp:Content>