Ajax Autocomplete trouble

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.NET

jQuery

Ajax-toolkit

I'm having trouble with the autocomplete on the page. The setup is complicated:
FrameworkMasterPage
ApplicationMasterPage
MyContentPage

Initially, FrameworkMasterPage holds everything in asp:UpdatePanel, but I've tried removing it just to check, it doesn't work even without updatepanel.

I call PageMethod, with the following signature:

<System.Web.Services.WebMethod()> _
   Public Shared Function GetPrimatelj(prefixText As String, count As Integer) As String()
     Dim tl As New List(Of String)
        tl.Add("one")
        tl.Add("two")
        tl.Add("onu") ' so I can check that "on" return two selections

        Return tl.ToArray
End Function

The method is executed successfully, but the result is full page rendering instead of method result. I get autocomplete dropdown, but it contains one under the other
D
o
c
t
y
p
e etc...whole page rendering letter by letter.

I've tried calling directly PageMethod proxy...same result. I've tried both AjaxToolkit AutoCompleteExtender (thus, the signature above) and jQuery Ajax call

Same result. Yes, I did autocomplete before, more then once :).

This is (base, there is more code due to cache handling, but this is the critical part) my ajax call

$.ajax({
                           url: "AjaxController.aspx/GetPrimatelj",
                           data: "{ 'term': '" + request.term + "' }",
                           dataType: "json",
                           type: "POST",
                           contentType: "application/json; charset=utf-8",
                           dataFilter: function (data) { return data; },
                           success: function (data) {
                               oldterm = request.term;
                               cache[request.term] = data.d;
                               response($.map(data.d, function (item) {
                                   return {
                                       value: item
                                   }
                               }))
                           },
                           error: function (result, status, error) {
                               console.log(status + " - " + error);
                           }
                       });

Help?