OK, I've re-created the scene from scratch, the problem is weird to say the least, and is mostly resolved.
The reason is say "mostly" is, in the game mode in attachment two, you will see the cube, and a plane underneath it. In attachment 1, you see where it is positioned on the y axis. The cube drags around, we have progress! However, not everywhere, as the top left corner it just gets "stuck". Nothing happens, the dragging seems be getting some interference from the plane below. The plane does not have any rotation applied to it.