Just spent a day to find this thread.
This worked for me and it's pretty simple
Add some css like
.hidn {
display:none; }
My drop function looks like
drop: function(event,ui) {
var liid = $(ui.draggable).attr("id");
$("#"+liid).addClass("hidn").remove(); // a patch for IE - add hidn class seems to work
}
Tested in both Firefox and IE8 for correctly hiding item from dragged list
One step further to remove from IE <ol>
.sortable({
items: "li:not(.placeholder)",
sort: function(event,ui){
$(this).find(".hidn").remove();
}