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I am attaching a modified version of the RadItemDragDropManager. In this version, the manager is not actually removing and inserting the RadListBoxItems, but it is reordering the items in the data structure (in the RefreshItemsAfterDragDrop method) - for the purposes of the example this data structure is a BindingList. Since the RadListBox is bound to the BindingList, when the order of the items in the BindingList is changed, this reflects on the RadListBoxItems as well. Feel free to modify the RadItemDragDropManager further according to your specific needs.
I hope this helps. If you have additional questions, feel free to contact me.
the Telerik team