Note sure when it stopped working exactly but all drag and drop features no longer work... images, URLs, tabs... you name it. I was on FF 16 and upgraded to 16.0.2 with no help. Safe mode... same behavior. Disable every single add-on and plug-in... same thing again. using default theme.
What's left to try?
I'm running Windows XP SP3.
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I also have this problem after updating to Firefox 16.0.2 on Windows 8 RTM. Firefox 16.0.1 worked fine. I disabled all add-ons and plugins, even created a new profile. Nothing helps.
And oddly enough, I went to download 16.0.1 to revert back... and the problem has fixed itself. Tab dragging and bookmark dragging both work now. I did not revert and I didn't do anything that should have changed this since my previous post. I restarted the browser afterward and Firefox is still "fixed"
A full system reboot got things working for me again. Not ideal but I'll take it for now.