I could reproduce your issue using your sample code as it is. Although I cannot offer the solution as I don't know what's happening inside, I suggest a workaround only to avoid the issue.
Move the ModalPopupExtender, Button ID="PartialPostbackButton" and Button ID="OpenButton" to outside the UpdatePanel as shown below:
<asp:Button ID="FullPostbackButton" Text="Cause Full Postback" runat="server" />
<br /> <br />
<asp:Button ID="PartialPostbackButton" Text="Cause Partial Postback" runat="server" />
<br /> <br />
<asp:Button ID="OpenButton" Text="Open Popup" runat="server" />
<ajaxToolkit:ModalPopupExtender ID="MyPopup" runat="server"
CancelControlID="CloseButton"
PopupControlID="TestPopup"
TargetControlID="OpenButton">
</ajaxToolkit:ModalPopupExtender>
<asp:UpdatePanel ID="TestUpdatePanel" runat="server">
<ContentTemplate>
<asp:Panel ID="TestPopup" BorderWidth="2" style="max-width:90%" runat="server">
<asp:Button ID="CloseButton" Text="Close Popup" runat="server" />
<p>
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consecteLorem ipsum dolor sit amet, consecte
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consecteLorem ipsum dolor sit amet, consecteLorem ipsum dolor sit amet,
consecteLorem ipsum dolor sit amet, consecte
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consecteLorem ipsum dolor sit amet, consecteLorem ipsum dolor sit amet,
consecteLorem ipsum dolor sit amet, consecte
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consecteLorem ipsum dolor sit amet, consecteLorem ipsum dolor sit amet,
consecteLorem ipsum dolor sit amet, consecteLorem ipsum dolor sit amet,
consecteLorem ipsum dolor sit amet, consecte
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consecteLorem ipsum dolor sit amet, consecteLorem ipsum dolor sit amet,
consecteLorem ipsum dolor sit amet, consecteLorem ipsum dolor sit amet,
consecteLorem ipsum dolor sit amet, consecte
</p>
</asp:Panel>
</ContentTemplate>
</asp:UpdatePanel>