I don't see how to edit my own posts, so I'll put it in a "reply".
While waiting for a response, I surfed the net for an answer and it seems that Windows 7 has imposed "auto arrange" which cannot be turned off as in previous versions. This means all files within a folder will be sorted by the criteria checked and a file cannot be pulled to the side within a folder.
I also found that it is believed this option to turn off "auto arrange" has been omitted because manual arranging of files tends to cause some computers to shut down.
Personally, I have not had this problem and find it unnerving not to be able to pull a file aside after 10+ years of being able to do so. I have used this function almost daily.
It is good to see that you were able to find your answer for yourself, not too many people even try. If you were able to do this before you posted, you would not have needed to post. But you would not have been able to share the situation about Windows 7's disabling of "Arrange Icons".
Therefore, all in all a good job and thanks for sharing your findings, as I am sure many will read your post and it will answer the questions of many of them.
Now that you have done such a good job, you can mark your thread as "Solved".
It only moves as time and posting move it, whether it has been solved or still open without an answer. it will still move. But by marking it solved, anyone looking for an answer and finding your solved thread on a search will know there is good information in there so they will open and read.
That is, if this thread was 20 threads down the list and someone opened it and made a posting to it, it would revert to the head of the list again.
I know what I am saying I just hope I have explained it to you OK.