This is not something we can reproduce in 1.0, though there was an issue in the betas with small icons mode.
How many pinned items do you have and where is your taskbar positioned?
Where it inserts is shown by the insertion line that appears when you are dragging.
I have nineteen pinned items. I've tried switching to large icons then back, removing items, and still I'm unable to arrange pinned items. I did notice that when I grab a pinned item, some of them have small icons and some have large icons that move as I try to arrange them. The small icons are about an inch above the pointer, when moving pinned items.
I just check in the About and it states: Version 0.98 Beta3
I Think I found something; There was a 0.98 and a 1.0 installed in the add and remove programs. I removed both, cleaned everything in the registry under Stardock, rebooted and installed 1.0. It was doing the same thing but messing around with it, I removed the weather icon from the Windows 8 start page because trying to move it kept popping back to the second position. It has now automatically alphabetized all the pinned items.
I have 19 pinned items, and have set the 'allocate room for large icons' to 12. There is a large gap between my last pinned item and the 'All Programs' (could hold one more small item to fill the gap). If I set the 'allocate room for large icons' to 11 to try and close the gap the 'All Programs' cuts the last pinned item in half. It appears that there needs to be an 'allocate room for small icons' in order to allocate specific space for the small icons.
Also, when I grab a small pinned item to move, the icon that is ghosted is sometimes large and small. This is static. If the ghosted icon shows a large icon it doesn't change, as does the small icon. I'm thinking that it should be displaying small icons only, if they are small items in the pinned list. The icons display exactly the same weather large or small is use in the pinned items list.
Also, when I grab a pinned item to move, the ghosted icon that moves with it is about an inch above the pointer, and depending where you grab the pinned item to move, the ghosted icon could be off the screen on the left edge.
