I see two problem here:
1. You point directly to the component that has 'rendered' attribute. See http://www.jboss.com/index.html?module=bb&op=viewtopic&p=4052203#4052203 for helphul info
2. To proceed with Ajax response, the action method should return null. Otherwise, if navigation occurs, you will get the whole page refresh instead of updating only the panel (it is an Ajax Request generates Non-Ajax Response mode)
Thanks a lot for your reply Sergey. Once again you have bailed me out!!
I tried to help another user as follows:
This uses your technique....