It appears that this feature is not going to be solved. The drag-and-drop functionality was only ever available on IE. Since Service Pack 2, it has not been available for most users on IE and caused other problems for those users. As a result, we have discontinued this feature.Drat.
That sent me out on a quest to find an alternative. I started at my favorite (pardon the pun) software source SourceForge.net. I found some interesting alternatives (BookmarkSync and LinkDistributor) but I kept running into references to SyncIt. When I went to www.syncit.com to see what that was all about, I was really confused. Then I ran across an explanation on www.webookmark.com. Interesting, but sad, story. Seems like lots of folks lost their bookmarks.
There are a couple of companies out there that have picked up SyncIt's code and are offering it for free or for a subscription. SyncIt's story and my experience with BlinkPro made me leery. I wanted something that I could control end-to-end.
I played with creating a web folder on my website, but couldn't get Windows to set My Favorites to a web folder. I even tried TweakUI.
In my searching, I finally came across FavoriteSync.com. They apparently are one of the organizations that picked up SyncIt's code but they have a twist. In addition to storing your favorites on their server (it's nagware), you can use any ftp site. It was a piece of cake to just point their application to my web site! Now, each computer has it's own copy of My Favorites synchronized with the others. Updates are pushed after 2 minutes (default but changeable) and pulled every 4 hours (ditto). The file on the server is even in xml. There's an xsl file that describes how to render it. I've got to learn about that.
When you install FavoriteSync, just ignore all the questions about setting up an account with them. Click on through and let it install. It'll show up in the system tray as a star. Right click on it and choose Options. Setup the Server tab to point to your ftp server.
I'm slowly weaning myself away from BlinkPro and onto FavoriteSync and am having NO trouble. You can see them here.