In order to achieve the desired scenario you will need to handle the DragOver of the target element where you can check the Item is present. And if you need to prevent the drop if the item is present you will need to set the e.Effects to DragDropEffects.None and to handle the GiveFeedback method of the first element. Inside of the handler you would need to check the e.Effects are none in order to set the cursor to Cursors.None. For your convenience I have prepared a sample project which demonstrates the exact approach with two ListBoxes.
Hope this helps. If you have any further questions let us know.
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