AJAX :: Script Manager Disabled In 2.0 Web

I am just about out of my mind on this due to spending way to much time trying to find an answer with no results. I am using vwd2008. The website is in 2.0 due to the hosting company not supporting 3.5 yet. I was using the ajax toolkit without any issues. Now all of a sudden the script manager is greyed out as are the tools. If I open a new site they are enabled. It's only on the two sites I have built in 2.0.

I went back to vwd2005 for this web and here the tools are visible and enabled but scriptmanager is greyed out. I tried tricking the site by building a page in a new web in vwd2008 and importing in the pages but when I try to load them I get an error related to scriptmanager. I've read many posts related to wireless devices causing issues but I have none attached. I've uninstalled and reinstalled both applications but nothing changes. I updated my web.config file to contain the following code:

</pages>namespaces>clear/>add
namespace="System"/>add
namespace="System.Collections"/>add
namespace="System.Collections.Specialized"/>add
namespace="System.Configuration"/>add
namespace="System.Text"/>add
namespace="System.Text.RegularExpressions"/>add
namespace="System.Web"/>add
namespace="System.Web.Caching"/>add
namespace="System.Web.SessionState"/>add
namespace="System.Web.Security"/>add
namespace="System.Web.Profile"/>add
namespace="System.Web.UI"/>add
namespace="System.Web.UI.WebControls"/>add
namespace="System.Web.UI.WebControls.WebParts"/>add
namespace="System.Web.UI.HtmlControls"/>namespaces>controls>add
tagPrefix="ajax"
namespace="System.Web.UI"
assembly="System.Web.Extensions,
Version=1.0.61025.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>add
namespace="AjaxControlToolkit"
assembly="AjaxControlToolkit"
tagPrefix="ajaxToolkit"/>controls>pages>