Custom handler is not a problem. Problem occurs in ScriptResource.axd while debugging the Java script in F12 mode.
Custtom handler registration is not correct and I am not sure what else need to be added back. I would recommend you to come up with a page with Master page and Master page should have Script Manager and calls to all the Js files. then using RadAsyncUpload control in the aspx page. I would like to see how does it work?
If I do as a separate project, it works fine for me too.
I would also recommend you to give all the possible cause and solution to "Error while uploading, HTTP Error code is: 500" from ScriptResource.axd file while uploading.
None of your demo have web.config registration details.