The definition of the ListBox looks good. Check if the Select and the Update commands are working properly. After you reorder the items look at the DB and verify that "DisplayOrder" field has been updated. If it is the the problem is with the Select command. Don't forget to add "ORDER BY" clause, so you can get the updated data:
ConnectionString="<%$ ConnectionStrings:TestConnectionString %>"
SelectCommand="SELECT * FROM [Countries] ORDER BY [SortOrder]"
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