Historically, SharePoint 2007 provides a nice feature called Explorer View (came from 2003 version) that simplifies document management - like upload, delete, and copy items across different Document library, using drag-and-drop feature.
There is a document, called “Understanding and Troubleshooting the SharePoint Explorer View” that describes the most common issues of why Explorer View might not work correctly. Unfortunately, not all scenarios are covered there.
One of the issues is that you might find drag-and-drop disabled in Explorer View – you just can’t move files across. A bit nasty issue, because Ctrl-C/V still works :)
The solution is to check that you have sufficient permissions for the Temporary Internet Files folder for the BUILTIN\Network Service account. This account must have read and write access to this folder to successfully complete a drag-and-drop operation.