Your for loop in populatePlaylist() is going to execute almost immediately (unless there are thousands of files in the list). There's really no processing going on, so what do you expect will take enough time to warrent a progress display?
Joe, thanks for the prompt response!
Realisticly dropping a few hundred files takes a few seconds to process. Not a large window of time for the application to reamin unresponsive, but long enough to display a progress indicator for a user wondering if anything is happening. Dropping a thousand files (a few months worth of music I've collected) causes a long enough pause that OSX starts spinning it's beach ball.
This is just a point of polish so I understand if it's not possible to update the screen while the AIR runtime is handling a NATIVE_DRAG_DROP event. However, I thought I'd read how to do this somewhere and the link is now evading me.
Well, there's the file drop itself, where the OS hands off the files to AIR and there's your for-loop in which you iterate through an array of the file names that have already been handed to you. If the pause occurs in the for-loop, then the solution is to only process a reasonable number of files at a time. If the pause is while the OS is talking to AIR, then I don't think there's anything direct that you can do about it. (An indirect might be to show the progress bar on mouse-up over the drop target -- when a drag is in-progress -- and turn it off at the end of the drop handler -- I haven't tried this, though).
If the pause is actually in the for-loop, then you can process only a small group of files at a time and use a listener for an asynchronous event (such as enter-frame) to trigger processing of the next batch until you are done. This will allow the UI time to update. See http://www.senocular.com/flash/tutorials/asyncoperations/ for an example.
Joe, that asyncoperations article from senocular.com was exactly what I was looking for. I've implemented + committed something similar to what Trevor suggests and my application no longer beach balls osx.
Thanks very much!