I've marked an In and Out point for the clip in the source frame but I cannot figure out how to drag it to the timeline. I can drag the video only or the audio only by dragging their respective icons. But I don't know where/how to click and drag both at the same time.
Just click and drag the video image or the audio waveform, depending on which view you're using. The buttons are for video only or audio only, as you've discovered. The overwrite and insert buttons in the source monitor will also edit the Source Monitor content into a sequence, based on track targeting.
Yes, that does it. I couldn't get myself to click on the whole video! Thanks very much.