This sample demonstrates how to enable a form of dragging and dropping with a "rollover" effect. It is not real dragging and dropping as the user must click once to start dragging and then again to stop dragging, but this is approach is sometimes more suitable for certain audiences (children who haven't learned how to drag and drop yet, among others). Scratch 1.4 does support standard dragging and dropping but there is a little irregularity in how it is implemented. Specifically, scripts for the sprite being dragged seem to be paused while the drag is in progress. Other scripts, however, seem to work just fine.
