The Drag&Drop page on the Preferences dialog allows you to configure behavior of WinSCP when transferring files using drag&drop to other applications. It does not affect drag&drop within WinSCP (for example between local and remote panels of Commander interface).
Refer to documentation of page sections:
The Allow moving from remote directory to other applications checkbox is by default disabled allowing you to only copy files using drag&drop. The reason behind this is that users expect the “copy” to be default drag&drop operation (the one performed what you do not hold any of
Ctrl/Shift modifiers). Unfortunately it is always the target application (Windows Explorer usually), that selects the default drag&drop operation. The only thing that WinSCP can do to force “copy” be the default is disable “move” operations all together. This would force Windows Explorer to use “copy”, because there wouldn’t be another option.
Another reason to keep the option disabled is that, particularly with Temporary folder mode, there’s a risk of losing your files, when moving files from temporary folder to their destination fails.
Use Use shell extension button to select Drag&drop Shell Extension download mode. With the mode you can download the files directly to target folder using drag&drop. If the button is disabled (grayed), you have either not installed the extension yet or not restarted your computer since.
Use Use temporary folder to select temporary folder download mode, if you cannot use the Drag&drop Shell Extension or you need to overcome its limitations. You cannot use background transfers in temporary folder download mode.
You can change the location for temporary folder on Storage page.
The Warn where there is not enough free space makes WinSCP try to guess if the files to be downloaded fits into the temporary directory.
The Warn when moving via temporary directory is enabled only when Allow moving from remote directory to other applications is checked. It makes WinSCP warn you that moving files from remote directory to local one via temporary folder is dangerous. WinSCP loses control of the download once it finishes transfer of the files to the temporary directory. Thus this is its last chance to remove the files from remote directory. If the target application (Windows Explorer) fails to deliver the files from temporary folder to target folder, you may lose your files.
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