I spend a lot of time for "trial and error" which I eventually get it WORKS, since most documentation on the web are for Adobe AIR 1.5 that doesn't require a sandbox in order to access local file.
However, just a quick question. When I create a event listener to listen for 'nativeDragStart' event in application sandbox
var file = air.File.createTempFile();
I keep getting error "TypeError: Data for file list format must be an array of Files..."
After few hours search again, I found the correct way of doing event.clipboard.setData should be
event.clipboard.setData(air.ClipboardFormats.FILE_LIST_FORMAT, new runtime.Array(file));
It is very frustrated for this doesn't officially documented anywhere....