Currently Being ModeratedFeb 3, 2013 10:50 AM (in response to CREAMASTER)
I have just tried this - it worked fine; clicked on the folder, held down and dragged to a higher-level folder. It also displays a red box whilst dragging showing you how many tracks are being moved. Where are you trying to drag it to?
Currently Being ModeratedFeb 3, 2013 10:55 AM (in response to CREAMASTER)
You can either make a new folder and drag into that or you can drag it out by moving to a space in the playlist list.
This does work, I've just tested it so if it doesn't on yours it's probably a bug. The only answer in that case would be to reinstall iTunes.
Edit: Hi Andy, I guess our posts crossed.