I think I found an error in your DropDemo Example (http://download.oracle.com/javase/tutorial/uiswing/dnd/dropmodedemo.html).

If you start the demo, select 'Insert' as 'List Drop Mode' and select, say 'List Item 9' and drag (copy) it to a position above, you will see that it does not get inserted properly (it is removed from the list entirely). I try to use your ListTransferHandler in one of my programs so I found this bug.