Your problem is that a Response.Redirect sends a response back to your client (browser) and since the corresponding request was made by an AJAX panel the javascript code of your AJAX control needs to parse the servers response. A Response.Redirect sends a response that would normally make the browser navigate to a different page, but since it's an AJAX control the response is meaning less to your RadAjaxPanel.
You can solve this by using Server.Transfer to make a "redirect" on the server side. This means that the flow of control is passed from on page to another (maybe also the same page with rewritten parameters) without the browser needed for interaction.
Read some about it here:
http://techahead.wordpress.com/2007/10/14/aspnet-servertransfer-vs-responseredirect/[
^].
If you still have questions come back and leave a comment! (But please google for Server.Transfer first!)
Happy coding!
-MRB