interesting. Thought mine was broken for days now. I use the new version of OS2008 on my N800. After reading this, I decided to play around with it and see if I could get it to work. Finally, it works.

Mine seems backwards from everyone else's. Mine only works if I drag the icon on the right, to the left column, so the folder is highlighted, but I CAN NOT drop it on the text or the folder on the left. It must be in the white area to the right of the text. Works perfectly every time. No applications open in the background. Not in full screen.

Strange, huh?

EDIT - scratch all that. It seems to actually be a invisible box that the item must be dropped in. It seems to be near the 6th character of the word in the left column. For example, in my category named "Games" the icon must be dropped at the end of the "s". Of the Category "My Selection", it only works near the "ec" of selection.

Make of that what you will.