virtualbox.org

I am trying to make Drag and Drop work between my Win7 x64 host and WinXp x86 guest. In settings, I've set the Drag and Drop to be bi-directional, but it works in neither direction.
I've also tried to use the shared clipboard for copying files, but that didn't work either (thought using clipboard for text works fine). The Guest additions are installed (v.4.2.10r84104)

What am I missing?

You are missing the part that it only works for Linux guests at this point (as described in the user manual).