You say this doesn't work in Windows 7, but why not. The feature of 'drag and drop' is still available in this new OS and I use it all the time.
Do you see any error messages when you try?
There is a big difference between the Windows XP and the Win 7 file management. Folders like Documents and Settings, and personal folders like My Documents, My Music, etc, have effectively disappeared in Win 7, to be replaced by User folders, and Documents, Music, and so on.
However, there are "Junction Point" folders that use the older OS names. These were introduced for legacy purposes for older software that still required Documents and Settings, and My Documents and so on. These Junction points are shortcuts only, and users get caught out when trying to move files into them when they get an Access Denied message.
Perhaps that is what you are seeing?
Is there a way to manually arrange photos within a folder on Windows 7? We used to be able to "drag and drop" a photo into place but that doesn't seem to be working on the new OS.