It's a bit tricky to make the move, but it is indeed possible. Make sure to drag it by the handle (or image), not the name. It requires a little rightwards jog to tell it to tuck in. Once you get the hang of it, it is second nature. I thought there was an animation on the wiki, but I couldn't find it. Edit: Also (and I just discovered this), you can right click on a folder to create a journal or character within that folder. And no, I don't think you can re-order the root folder. It might be possible to put loose items in a folder, sort it, and then delete the folder, releasing its contents to the root. I don't know if they would retain their order.