The error "Sys.WebForms.PageRequestManagerServerErrorException: An unknown error occurred while processing the request on the server. The status code returned from the server was: 401", is due to a permissions issue. One can determine that by checking on the 401 error code.
In my case it was because a method on one of my web pages needed to have write access to folder where it created temporary images. Without the permission the browser would throw this generic error message. If you ran the page on a browser on the actual server, you would get the actual error message - which in my case clearly pointed to the fact that I did not have write access to the folder I was trying to write the images to.
Once the User account was given write access to that folder, the problem went away!