Your grid is set to "Vertical" sorting, yet it's a horizontal placement grid...
The "nothing happens on drop" is because you are the one that needs to change the logic for what happens when you drop a cloned item. Look inside UIDragDropItem's OnDragDropRelease function. It has a check: if the item is cloned, simply destroy it. Override this function in your custom Drag & Drop item script and do what you need it to.
You will also get the same effect if you simply comment out the "if (!cloneOnDrag)" section, but then you will run into an issue where you can drop the item into the scroll view you started it with, effectively duplicating items.
This is where custom logic needs to filter this kind of behaviour -- which is the valid scroll view to be dropped into and which isn't?