XP Pro SP2. I am able to reproduce this consistently.
1. Start ArtRage.
2. Scribble whatever on the canvas.
3. Create a new layer.
4. Open the layer manager.
Dragging the layer-with-scribble up so that it is above the blank layer doesn't work. It looks like it's going to, but then it just reverts back to its original position. However, dragging the blank layer down so that it is below the layer-with-scribble works fine.
Thanks for reading,