I too was dismayed to find that that the very handy ability to drag and drop folder blocks was broken on recent versions of this add-on -- including the latest official version 0.6.12.
The good news is, that everything seems 100% working again with the latest version, 0.6.13. However, 0.6.13 hasn't been "approved" by Mozilla yet, and is only available for installation via the Version History page.
Anyway, thanks to the developer for making and maintaining this simple yet intuitive/powerful add-on. It's become one of my key tools in organizing bookmarks -- especially bookmarks that require special attention and/or have different priorities than the typical bookmarks in my main library. Keep up the good work!
(NOTE: For those unfamiliar with how to get to the Version History page, scroll to the bottom of the main page, click the "Version Information" block to expand it, and then click the link "See complete version history". Version 0.6.13 should be at the top of the list.)