Tracking state using ASP.NET AJAX / ICallbackEventHandler

If you're already shuffling the ViewState around anyway, you might as well use an UpdatePanel. Its partial postbacks will update the page's ViewState automatically.

Check out this blog post: Tweaking the ICallbackEventHandler and Viewstate. The author seems to be addressing the very situation that you are experiencing:

So when using ICallbackEventHandler you have two obstacles to overcome to have updated state management for callbacks. First is the problem of the read-only viewstate. The other is actually registering the changes the user has made to the page before triggering the callback.

See the blog post for his suggestions on how to solve this. Also check out this forum post which discusses the same problem as well.