I\'ve almost got this working apart from one little annoying thing...
Because the ListBox selection happens on mouse down, if you start the drag with the mouse down
I'm surprised that the behaviour difference between ListBox and the Windows Explorer has not been taken care of after 4 years across 3 major updates of the .NET framework.
I ran in to this problem back in Silverlight 3. I ended up overriding the mouse down and mouse up event handler to fully simulate the Windows Explorer behaviour.
I don't have the source code any more but the logic should be:
When mouse down
When mouse up (on the same item)
However This should really be Microsoft's job to update the behaviour to be consistent to the operating system and to be more intuitive. I've submitted it as a bug to Microsoft if any body wants to vote for it: http://connect.microsoft.com/VisualStudio/feedback/details/809192/