It sounds like you were not logged in properly. If you are properly logged in, you will have transfer rights to "move" files into the appropriate folder.
You should probably not be trying to move the "folder" containing your site into your website hosting space; probably you should only be moving the contents of that folder (the files, and any folders, and their files, that are contained in your local folder/directory).
When you log into your site, by going to ftp://yoursite.com , after entering your user name and password, you should see a folder/directory with the name "yoursite.com". Click on that folder to "enter" it, and then try your "drag and drop" from within the folder on your computer that holds your files.
I also suggest you read, as I said in the other thread, the "Building A Website" section of the Dreamhost Wiki - it discusses the whole ftp process in considerably more detail than the "Uploading your site" section. Read through the whole article so you understand what is happening, paying special attention to the last half of the article. That is what describes where you are in the process - uploading via ftp - as you have already "built a site"
While it should work, I personally do not recommend using Internet Exploder as an ftp client; the other article has much better instructions, and discusses the whole folder/directory issue in greater detail. I think you will have better luck with it all once you see and understand the "larger picture" described in the "Building A Website" article.