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Ed, I am using LR 1.2 and you can only move photos around in thumbnail view. You need to be in Library mode and in either Folders or Collections. In either of those, once it has loaded all of the thumbnails, you simply left click to grab the file and drag it to where you want it. As you drag it, you will see a dark line appears between the two photos you are between and that is were the photo will be placed if you release the left mouse button.
If you can't do that, there is some thing going on with a setting or something. Hope this helps some.
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