Some time ago, I mentioned a bug that I have discovered in the ScriptManager where it mapped pages from a virtual path provider to the local file system and failing when page methods are enabled. I have just tested this under Windows 7 RC and MOSS 2007 SP2 and the bug seems to have gone away. This is a .NET framework issue really and apparently it is fixed in .NET 3.5.1. I am yet to test this on .NET 3.5 SP1 with the latest hotfix but I will update this post with my findings since this has been an issue to SharePoint and ASP.NET developers.

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