I don't know about your xml idea, still thinking about that, actually I don't get it.
But on the latter question, It's a balance between time to create, and functionality. I personally don't like the Microsoft Ajax toolkit, and I'm stopped using it completely now, replacing it with jquery.
My challenge is a little different though. What I meant with the xml thing, is that the whole site has a setup file, which defines the controls on the page. Like this:
<PageSetup><ControlType="TextBox"CssClass="test"PageOrder="1"Text="Default text in the textbox"/><ControlType="Drowdown"CssClass="dropdownClass"PageOrder="2"><Itemtext="Dropdown item 1"Value="1000"/><Itemtext="Dropdown item 2"Value="2000"/></Control>
Hope that clearifies it a bit
I´ve started the project, and chosen to avoid the asp.net controls. So right now I build a long html string from codebehind, bases on the xml settings, and inject it on the page with jquery.