Well, I would be grateful if you can tell me how to do this, or either point me to someone who can. As it stands, the desktop widgets (neither of them) simply doesn't get any drag events from the desktop.
Ctrl+C, Ctrl+V, and such are already possible. Also possible to select text with Shift + arrow keys. (The only feature missing is selecting them by dragging - which is not possible because of the reasons above. If you know a workaround or someone who knows a workarund, it is welcome.)
About your toolbar idea - it is not bad (was already recommended), but I don't have an idea about how to fit it onto the finger-friendly UI.