What does success look like?

I have just realized that taxotoggle.js mentions a "taxonomy" class, which probably exists only in my theme. I corrected it to "terms", now (cvs). I tested on a fresh install, and it does work.

As a quick fix, replace all ".taxonomy" occurrences with ".terms" in the js file.

Thanks for the feedback! I'll prepare a screenshot, too.

It would still be nice to get a description of what happens once dragging is complete. Does the term get added to a different node? Or is it just a client side thing?

Yes, the term gets added to the node on the server side - through an ajax call. The result is a new list of terms for the node, which is shown on the page, dynamically.