I have no experience using JQuery but I plan on checking it out the first chance I get.
There is a free
ASP.NET Ajax Control Toolkit available that has an
UpdatePanelAnimationExtender which will let you specify animations for when the update panel is updating and when it is returning.
Please note that this ToolKit uses the Microsoft Ajax library...it's not JQuery.
This extender is a little weird from what I remember. I believe that the animation that you specify for when the request is sent to the server is played for all UpdatePanels. The reason for this is there is no way for you to determine which UpdatePanel is causing the asynchronous postback using the Micirosoft Ajax Library (which the toolkit is based upon).
Keep this in mind when you're developing your animations.
(I ended up tearing this apart once and figuring out a way around the problem...but the task was pretty messy, involved a lot of research and it also involved accessing private members of events that aren't meant to be accessed by outside code)
-Frinny