There's a bug in Windows 10 1803.
Older versions of WinSCP included a workaround for that bug. But as the workaround had side effects, it was removed in 5.14.3, when Windows 10 1803 came out of use.
See https://winscp.net/eng/docs/history?a=5.14.3 and https://winscp.net/tracker/1644

Similar to your screen shot, except mine says "Shell extension cannot work on this system".
My computer is Windows 10 Enterprise, version 1803 if that is relevant.

What are your settings on this page?
https://winscp.net/eng/docs/ui_pref_dragdrop

Over the past several versions, drag and drop only works intermittently. I am currently using 5.17.6 (build 10516) and the problem persists in this version.
My workflow - using the Explorer interface, I click and hold a file on the remote server and I attempt to drag it to a folder on my Windows 10 (1803) machine. The pointer changes to a pointer with a box and plus sign, indicating that the file should be ready to drop. But, when I release my mouse, the file has not transferred. The destination folder could be my desktop or a folder within My Documents but that doesn't seem to impact whether or not the file copies successfully.
It appears that I can right-click on the file, choose copy and then right click in a destination folder and paste without issue, but drag and drop does not work consistently. Thanks.