No need to use terminal. I had the same problem. I couldn't drag the Applications icon/link/folder from the sidebar to the dock right next to the trash can.
Here how I did it.
1. Open a finder window (any folder will do)
2. Right click on the "Applications" link/icon and select "Open Enclosing Folder"
3. This opens another finder open which should show folder for Applications, Library, Developer, System etc.
4. Drag the Applications folder from this finder window (not sidebar) to the dock.
5. Do a happy dance,,,,,
BTW - i am running 10.6.8 (Snow Leopard), not sure if this applies to other version of OS X.
Big Fruit is notorious about changing shortcuts/gestures/methods from one version to another.