The desired functionality could be hardly achieved with RadGrid.
However, we are currently implementing drag and drop for our RadTreeList control which will be released in Q2 2011. There you would be able to drop items over a specific item and use automatic database operations to update the items relation without writing any code. Therefore I would suggest that you wait for the Q2 2011 release and use RadTreeList for your purpose.
Other than this, with RadGrid, you can try implementing a self-reference grid and drop the items over the nested table view.
the Telerik team