You can't do it. I believe it is related to the security sandbox and how plug-ins are allowed to interact with the browser.
You can drag something from your desktop into the browser. But, a swf has no way to access that something.
Thank you for the quick response Jeffry,
Just thinking about it...
Even using an iFrame; I have no idea how'd you pass info about the dragged file back to Flex. As far as I knew, there was no way to access the dragged file via AJAX either.
But, if you figure something out, be sure to let me know.
Okay Sure Jeffry, will update you if I crack it