this is weird. i have a playlist in my itunes that somehow doesn't allow me to rearrange the sequence of songs manually (as in dragging it in order). whereas my other playlists allow me to do it! i noticed with the latter ones that "part of a compilation" (in their get info) was marked "yes" so i chose 'yes' to my pop playlist (the one i'm having difficulty with) but to no avail. help!
Make sure you have the "Track #" selected in the playlist window (highlighted as aqua blue, white when deselected)... it's the first one on the left, right before the "Name" column...
Your playlist is currently sorted by category. Deselect the sorting by clicking on the left-most blank tab (the one on top of the song numbers) and re-arrange your songs as you will.