I have tried reverting to Gnome Shell and still have the problem,
however I did try some other linux os and these worked fine. It seem to
only effect Unity 3D and 2D as far as I can tell.

Also I did try XFCE 4.8 on my 11.10 system and this worked fine. I have
also tried some settings but alas still not working as well as it used
to.

I am sure it will be resolved very soon and I can work around it by
using the left touch pad button and then move window as normal.

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https://bugs.launchpad.net/bugs/859474

Title:
  Dragging with touchpad unusable

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