Dragging a class file to a parent group does not work. This was happening when the parent group was not a real folder and the file location was actually supposed to be the same before and after.
You recieve the option to overwrite or skip the file; both of these options do nothing in relation to changing the group the file is in.
Group 1\Group 2
Group 1\Group 2\Group 3
Group 1\Group 2\Group 3\FileToMove.h
Group 1\Group 2\Group 3\FileToMove.m
if I drag the two files to Group 2 it will not work.
The physical locaiton of the file is not supposed to change. Maybe it should be an option for it to change the physical location as well.