Thanks to this blog Trabalhando com o ASP.NET Atlas Framework - Parte III for finally giving me the hint on how to add a Cancel/Abort option to the atlas:UpdatePanel UpdateProgress template.
Just add an <input runat="server" type="button"> <asp:LinkButton id="abortButton" runat="server">
The trick is id=abortButton! You don't need to add any further client or server code/jscript/whatever. The presence of that control id is enough. When the UpdateProgress is displayed, you can click to cancel the Ajax XmlHttpRequest.
Why was this so difficult to figure out? I guess because if you use the Designer to create the ProgressTemplate it adds the button for you... but i was creating the controls in Source view, and it was NOT immediately obvious how the Abort/Cancel should be implemented.
EDIT 22-Feb-07 This post is out-of-date; the released version of ASP.NET AJAX doesn't work this way... just one of the breaking changes - check the Migration Guide: Converting Applications from “Atlas” CTP to ASP.NET AJAX RTM