<p>I'm using an older version of ASP.NET AJAX due to runtime limitations, Placing a ASP.NET Validator inside of an update panel does not work. Is there a trick to make these work, or do I need to use the ValidatorCallOut control that comes with the AJAX toolkit?</p>

@jmein
Actually the problem is that the Validator client script's don't work when placed inside of an updatePanel (UpdatePanels refresh using .innerHTML, which adds the script nodes as text nodes, not script nodes, so the browser does not run them).
The fix was a patch released by microsoft that fixes this issue. I found it with the help of Google.
http://blogs.msdn.com/mattgi/archive/2007/01/23/asp-net-ajax-validators.aspx