>But where are you using MouseUp? You're using MouseDown to start the DragDrop aren't you?

Originally I did not use drag&drop at all, I just used the object's MouseUp event. It was acctually pretty slick, 1 line of code was all I needed to move a control on the form at runtime using the click-hold-drag mouse method.

Now that I use drag&drop I do not use MouseUp any more. I use MouseDown to start the DoDragDrop.
I also added movment of the object as the mouse moves (just like the form designer) by using the DragOver event. I'll look into snapping later.