Ajax update panel not working suddenly

In my project, I have 2 dropdownlist one for choosing the state and after selecting the state second dropdown loads the cities in that state. well, it is pretty straightforward.
I did added the script manager and the update panel, as usual. And everything worked fine, suddenly the ajax update is not smooth and it flickers. Under the same project i created a test page and added 1 dropdown list with 3 states, added a label control to show which state selected using ajax update. code shown below, suprisingly it is not working either. However, i tried  the same in a different test web application it works. May be there is a conflict in web.config file. 
any ideas, thanks in advance
<form id="form1" runat="server"> <asp:ScriptManager ID="ScriptManager1" runat="server"></asp:ScriptManager> <asp:UpdatePanel ID="UpdatePanel1" runat="serv ...