I ran into this issue just now after I downloaded and installed "CDisplay" (for viewing comic book files).
Immediately after the installation completed, I was unable to drag icons on the desktop and also could not drag column width handles in the Registry Editor. I first checked task manager and found no unusual applications, processes, or services running. Then I checked the registry at:
HKEY_LOCAL_MACHINE\Software\Microsoft\Windows\CurrentVersion\Policies\Explorer\NoActiveDesktopChanges REG_DWORD and found that it was set at 0X00000001(1). (I found this suggested in another fourm, but I'm not sure it has anything to do with anything...)
Making no changes to the registry, I uninstalled "CDisplay". At this point I still did not have "drag" functionality. I closed all running applications one by one and checked for functionality to be restored each time, but it still did not return. It was at this point that I found and read this whole thread, so then I looked at Control Panel>Mouse> ClickLock and it was not checked. Finally, I pressed the escape key, and to my surprise, drag functionality was restored. Yay.
The problem is that nowhere here have we found a reason WHY this happens... Pressing 'Esc' should not do anything typically, however for this problem, it does. I am thoroughly unconvinced that some mysterious crumbs have just happened to lodge themselves under tens of forum poster's 'Esc' keys. Magic crumbs aren't causing this. Could the escape key be ending some kind of hidden process that is running unbeknownst to us all? Possibly a malicious one? Aside from a hidden process running from the installation of "Cdisplay"(or others as I've gathered from previous posts), what setting could have been changed that a simple press of the 'Esc' key, (no matter what window currently hold focus) would fix? Maybe 'Esc' ended a thread or something that was not closed out during installation or uninstallation of "CDisplay"?
I'm glad the dragging issue is fixed, but I just think it's important to learn what caused (or is causing for some) the problem in the first place. I don't really have the knowledge/experience to come to a definite conclusion on my own, thus I ask...
Thoughts?