Unfortunately the .NET collections (and collection interfaces) do not offer a way to move an item. The TreeView just casts the ItemsSource or Items collection (whichever is in use) to an IList and then removes the item from the source collection and adds it to the destination collection. With the current collection implementations the most we can do is replace an item, but that does not help much during drag/drop where you indeed move an item.
If you are using a custom items source that does support moving items, the Q2 version of the TreeView will allow you to customize how the TreeView reacts to a successful drag/drop.
We will appreciate any feedback on how we can improve the default behavior.
the Telerik team