2 small fixes; release-point was misnamed in the let and indentation was
wrong in the latter part of the code.
Use this version.  -- Bob

(setq mouse-drag-and-drop-region 'shift)

(defun mouse-drag-and-drop-region (event)
  "Move text in the region to point where mouse is dragged to.
The transportation of text is also referred as `drag and drop'.
When text is dragged over to a different buffer, or if a
modifier key was pressed when dropping, and the value of the
variable `mouse-drag-and-drop-region' is that modifier, the text
is copied instead of being cut."
  (interactive "e")
  (require 'tooltip)
  (let ((start (region-beginning))
        (end (region-end))
        (point (point))
        (buffer (current-buffer))
        (source-window (selected-window))
event-handler
release-point
        value-selection)
    (track-mouse
      ;; When event was click instead of drag, skip loop
      (while (or (mouse-movement-p (setq event (read-event)))
(setq event-handler (and (consp event)
  (intern-soft (concat "handle-"
       (symbol-name
(event-basic-type event)))))))
(if (fboundp event-handler)
    (progn (funcall event-handler event) (setq event-handler nil))
  (setq event-handler nil))
        (unless value-selection ; initialization
          (delete-overlay mouse-secondary-overlay)
          (setq value-selection (buffer-substring start end))
          (move-overlay mouse-secondary-overlay start end)) ;
(deactivate-mark)
        (ignore-errors (deactivate-mark) ; deactivate any existing region
in other window
       (mouse-set-point event)
       (tooltip-show value-selection)))
      (tooltip-hide))
    ;; Do not modify buffer under mouse when "event was click",
    ;;                                       "drag negligible", or
    ;;                                       "drag to read-only".
    (if (or (equal (mouse-posn-property (event-end event) 'face) 'region) ;
"event was click"
    (and (setq release-point (posn-point (event-end event)))
(member 'secondary-selection ; "drag negligible"
(mapcar (lambda (xxx) (overlay-get xxx 'face))
(overlays-at release-point))))
            buffer-read-only)
        ;; Do not modify buffer under mouse.
        (cond
         ;; "drag negligible" or "drag to read-only", restore region.
         (value-selection
          (select-window source-window) ; In case miss drag to other window
          (goto-char point)
          (setq deactivate-mark nil)
          (activate-mark))
         ;; "event was click"
         (t
          (deactivate-mark)
          (mouse-set-point event)))
      ;; Modify buffer under mouse by inserting text.
      (push-mark)
      (insert value-selection)
      (when (not (equal (mark) (point))) ; on successful insert
        (setq deactivate-mark nil)
        (activate-mark)) ; have region on destination
      (let ((dest-window (selected-window))) ; when beyond buffer
;; Take care of initial region on source.
(if (equal (current-buffer) buffer) ; when same buffer
            (let (deactivate-mark)     ; remove text
      (unless (member mouse-drag-and-drop-region (event-modifiers event))
(kill-region (overlay-start mouse-secondary-overlay)
                             (overlay-end mouse-secondary-overlay))))
          (select-window source-window)
          (goto-char point)       ; restore point in source-window
          (activate-mark))       ; restore region
;; Ensure change focus to any new frame; typically edits
;; would continue in its selected window where the text was
;; dropped.
        (select-frame (window-frame dest-window))
(select-window dest-window)))
    (delete-overlay mouse-secondary-overlay)))