>
>When I try to create a new Web site Project I don't have many templates. Should I just use ASP.NET Web site? For some reason I don't even see ASP.NET AJAX enabled template.
>
>What do you have?

Do you have .NET Framework 3.5 selected in the New Project form (it's in the upper-right hand side of the screen)?

When I select Visual C# / Web (and .NET Framework 3.5) I have:

ASP.NET Web Application
ASP.NET AJAX Server Control
ASP.NET Server Control
ASP.NET Web Service Application
ASP.NET AJAX Server Control Extender
WCF Srevice Application