This discussion dates from 2008 and it's still happening today with version 1.8rc1:
interaction between draggables and sortables works fine via the parameter connectToSortable unless the items in that sortable list are floated to the left (wich is the accepted method to make a sortable list into a grid).
with Firebug go to CSS and right click the console to create a new rule that will be ul > li { float:left } and that's it; the draggable-sortable is broken until you undo this new rule.
I've tried jonathan14's fix giving either the ul or li a size but unfortunately this doesn't work for me.
And by the way, this problem is present in both Firefox and Chrome (and with Chrome, my guess is in Safari too).
Does anyone know if there's a fix or if it's in the works or something? Thanks.