diff --git a/browser/components/places/content/menu.xml b/browser/components/places/content/menu.xml
index ead46e5363f4..92e47851f3c1 100755
--- a/browser/components/places/content/menu.xml
+++ b/browser/components/places/content/menu.xml
@@ -181,6 +181,8 @@
             this._overFolder.closeMenuTimer = this._overFolder
                                                   .setTimer(this._overFolder.hoverTime);
           }
+
+          this._rootView._draggedNode = null;
         ]]></body>
       </method>
 
@@ -896,8 +898,9 @@
       <property name="insertionPoint">
         <getter><![CDATA[
           // By default, the insertion point is at the top level, at the end.
-          var index = -1;
+          var index = PlacesUtils.bookmarks.DEFAULT_INDEX;
           var folderId = 0;
+          var orientation = Ci.nsITreeView.DROP_BEFORE;
           var isTag = false;
 
           if (PlacesUtils.nodeIsFolder(this._resultNode)) {
@@ -907,20 +910,21 @@
 
           var selectedNode = this.selectedNode;
           if (selectedNode) {
-            if (PlacesUtils.nodeIsFolder(selectedNode)) {
-              // If there is a folder selected, the insertion point is the
-              // end of the folder.
+            var popupNode = document.popupNode;
+            if (popupNode == popupNode.parentNode._emptyMenuItem) {
+              // If (empty) menuitem is selected the insertion point
+              // is inside the folder, at the end.
               folderId = PlacesUtils.getConcreteItemId(selectedNode);
+              orientation = Ci.nsITreeView.DROP_ON;
             }
             else {
-              // If there is another type of node selected, the insertion point
-              // is after that node.
+              // In all other cases the insertion point is before that node.
               folderId = PlacesUtils.getConcreteItemId(selectedNode.parent);
               index = PlacesUtils.getIndexOfNode(selectedNode);
               isTag = PlacesUtils.nodeIsTagQuery(selectedNode.parent);
             }
           }
-          return new InsertionPoint(folderId, index, 1, isTag);
+          return new InsertionPoint(folderId, index, orientation, isTag);
         ]]></getter>
       </property>
 
diff --git a/browser/components/places/content/toolbar.xml b/browser/components/places/content/toolbar.xml
index 4867a39e75b4..b2c4d73018c7 100755
--- a/browser/components/places/content/toolbar.xml
+++ b/browser/components/places/content/toolbar.xml
@@ -384,26 +384,28 @@
       <property name="insertionPoint">
         <getter><![CDATA[
           // By default, the insertion point is at the top level, at the end. 
-          var index = -1;
+          var index = PlacesUtils.bookmarks.DEFAULT_INDEX;
           var folderId = PlacesUtils.getConcreteItemId(this._result.root);
+          var orientation = Ci.nsITreeView.DROP_BEFORE;
           var isTag = false;
 
           var selectedNode = this.selectedNode;
           if (selectedNode) {
-            if (PlacesUtils.nodeIsFolder(selectedNode)) {
-              // If there is a folder selected, the insertion point is the
-              // end of the folder.
+            var popupNode = document.popupNode;
+            if (popupNode == popupNode.parentNode._emptyMenuItem) {
+              // If (empty) menuitem is selected the insertion point
+              // is inside the folder, at the end.
               folderId = PlacesUtils.getConcreteItemId(selectedNode);
+              orientation = Ci.nsITreeView.DROP_ON;
             }
             else {
-              // If there is another type of node selected, the insertion point
-              // is after that node.
+              // In all other cases the insertion point is before that node.
               folderId = PlacesUtils.getConcreteItemId(selectedNode.parent);
               index = PlacesUtils.getIndexOfNode(selectedNode);
               isTag = PlacesUtils.nodeIsTagQuery(selectedNode.parent);
             }
           }
-          return new InsertionPoint(folderId, index, 1, isTag);
+          return new InsertionPoint(folderId, index, orientation, isTag);
         ]]></getter>
       </property>
 
@@ -916,6 +918,8 @@
           if (this._overFolder.node)
             this._overFolder.closeTimer = this._setTimer(this._overFolder.hoverTime);
           PlacesControllerDragHelper.currentDropTarget = null;
+
+          this._self._draggedNode = null;
         },
 
         getSupportedFlavours: function TBV_DO_getSupportedFlavours() {
diff --git a/browser/components/places/content/tree.xml b/browser/components/places/content/tree.xml
index 945988836cdc..279958f795b0 100644
--- a/browser/components/places/content/tree.xml
+++ b/browser/components/places/content/tree.xml
@@ -440,7 +440,7 @@
               return this._cachedInsertionPoint = null;
           }
 
-          var orientation = Ci.nsITreeView.DROP_AFTER;
+          var orientation = Ci.nsITreeView.DROP_BEFORE;
           // If there is no selection, insert at the end of the container. 
           if (!this.hasSelection) {
             var index = this.view.rowCount - 1;
@@ -451,9 +451,9 @@
 
           // This is a two-part process. The first part is determining the drop
           // orientation.
-          // * The default orientation is to drop _after_ the selected item. 
-          // * If the selected item is an open container, the default 
-          //   orientation is to drop _into_ that container.
+          // * The default orientation is to drop _before_ the selected item.
+          // * If the selected item is a container, the default orientation
+          //   is to drop _into_ that container.
           //
           // Warning: It may be tempting to use tree indexes in this code, but
           //          you must not, since the tree is nested and as your tree 
@@ -468,18 +468,18 @@
           var min = { }, max = { };
           selection.getRangeAt(rc - 1, min, max);
           
-          // If the sole selection is an open container, insert into it rather 
-          // than adjacent to it. Note that this only applies to _single_ 
-          // selections - if the last element within a multi-selection is an
-          // open folder, insert _adjacent_ to the selection.
+          // If the sole selection is a container, and we are not in
+          // a flatlist, insert into it.
+          // Note that this only applies to _single_ selections,
+          // if the last element within a multi-selection is a
+          // container, insert _adjacent_ to the selection.
           //
           // If the sole selection is the bookmarks toolbar folder, we insert
           // into it even if it is not opened
           var itemId =
             PlacesUtils.getConcreteItemId(resultView.nodeForTreeIndex(max.value));
           if (selection.count == 1 && resultView.isContainer(max.value) &&
-              (resultView.isContainerOpen(max.value) ||
-               itemId == PlacesUtils.bookmarksMenuFolderId))
+              !this.flatList)
             orientation = Ci.nsITreeView.DROP_ON;
 
           this._cachedInsertionPoint =