I'm not sure why the Hand wants to get rid of the dropping morph so soon. After all, the default behavior on drop is to change ownership. And if the drop is rejected, the Hand deletes the morph.
If you just comment out the removeMorph: line in HandMorph>>dropMorph:event: it still seems to work OK.
Yes, until you make a mistake in your drag and drop code. The reason why the hand tries to get rid of the morph is only because it makes it much more robust. For example, try to drop some guy who has an error in #wantsToBeDroppedInto: - this will screw the system.
BTW, on an even larger scale I think that drag and drop shouldn't even be done by adding some morph "physically" to the hand. For me, the hand represents the mouse cursor so everything added to it, logically _is_ the mouse cursor. Dragging objects is something which (in my understanding) happens by having the morph being dropped "follow" the hand. But that's an issue for a different conversation ;-)
Cheers, - Andreas