Update: Since version 2.2, temporary directory can be changed directly in WinSCP in Preferences.

Update 2: Since many pople ask, why are the files downloaded first to temporary directory at all, here is short explanation: Windows drag&drop mechanics does not allow source application of drag&drop operation to find out easily, where the files are dropped. It is up to target application (Windows Explorer usually) to transfer files to destination. It is rather reasonable, because source application can hardly transfer files to all possible destinations. Keep in mind that you can drop files not only to a directory, but even to ZIP file (or any other archive), remote directory (via FTP, SCP, SFTP….), trash, ….

Obviously even Windows Explorer (or any other target application, like WinZip) cannot download files from any possible source (particulary it does not know SCP/SFTP). So the trick is that WinSCP tells Explorer that the files are in temporary folder (from where Explorer knows how to get the files) and a moment before the Explorer starts to copy files from there, WinSCP downloads the files there.

There is a method how to allow direct downloads using drag&drop, at least to normal folders (not FTP, etc.). The method will be eventually implemented in WinSCP. The drawback is that it requires Explorer extension (DLL) to be installed to Windows, which requires you to have administrator priviledges to install WinSCP. It also make WinSCP lose its great advantage, that it is standalone application (EXE file) not requiring any installation at all.

Update 3: the method mentioned above was implemented in 3.5.5 as “drag&drop shell extension”.