It seems that when you use AjaxFileupload inside an Updatepanel it is not working as expected. You can refer following links for more detailed explanation and try the ajaxified file upload solution.
http://ajaxcontroltoolkit.codeplex.com/workitem/27401
http://msmvps.com/blogs/luisabreu/archive/2006/12/14/uploading-files-without-a-full-postback.aspx
http://aspalliance.com/1442_Building_AJAX_Enabled_File_Uploading_System_with_Progress_Bar_Using_ASPNET_20.all
http://geekswithblogs.net/rashid/archive/2007/08/01/Create-An-Ajax-Style-File-Upload.aspx
Cheers
Samitha
http://ajaxcontroltoolkit.codeplex.com/workitem/27401
http://msmvps.com/blogs/luisabreu/archive/2006/12/14/uploading-files-without-a-full-postback.aspx
http://aspalliance.com/1442_Building_AJAX_Enabled_File_Uploading_System_with_Progress_Bar_Using_ASPNET_20.all
http://geekswithblogs.net/rashid/archive/2007/08/01/Create-An-Ajax-Style-File-Upload.aspx
Cheers
Samitha