Using Lightroom to rearrange folders DOES update the catalog. A lot of people recommend rearranging outside of Lightroom and then update the folder locations of folders that you move. If you are careful, moving within Lightroom can be successful, quick and efficient. However, it seems be quite easy to lose folders and images during the process. What seems to be the more reliable method is to use Finder or File Explorer to do the rearranging, and then follow these instructions to synchronize your catalog:
Renaming should probably be the within Lightroom. Otherwise, you'll probably lose all of your adjustments.
I'd like to rearrange folders by dragging them into other folders and renaming them
Here's what I think is a much better alternative. Don't do this.
Instead, achieve organization via assigning keywords and other metadata in Lightroom. This can give you a far superior organization -- and without the possibility of moving folders and then having trouble reconnecting them, which for some people seems to be a difficult thing to do. Once you have added keyowrds and other metadata, you use the keywords and other metadata to search and find your photos.
I prefer doing the rearranging using Lightroom's Folders panel, because it does update the catalog automatically, and you can easily see what you are moving since Lightroom shows you the contents of each folder in its grid. I haven't had experiences that Jim Hess mentions of it losing files and folders. For a complete lesson in all reorganizing tasks (moving folders into others, moving photos from one folder to another, creating subfolders, renaming folders, etc, here's a video tutorial I made. (It was recorded with an earlier version of Lightroom but it still completely applicable.)
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I have seen several threads of lost files when moving files/folder within Lightroom when going from one physical drive to another. I have seen only one instance (a single comment with no followup from the commenter) of losing files when moving files/folders on the SAME physical drive. I have no qualms about moving on the SAME drive but if I ever have to move files/folders to another drive I will use the OS/Relink method.
My recommendation here may be a little more work, but also a little safer as LR is not a file browser and often can fall down when moving large numbers of files.
Backup your catalog.
Exit LR if it is running.
Using Finder/Explorer, move the folders as you desire, do NOT rename anything.
Open LR, do a "find missing" in the Folders panel on all the folders you moved.
Now use LR to rename the folders as you desire in the Folders panel.