You have your original element, which works quite well, but I see that your commented code violates the functionality.
Take a look at your droppable code:
accept: "#topSquareList li",
Your scaling function made a clone that is not part of #topSquareList. I suspect that is why.
When you use clone (), this clone is not a child of #topSquareList (only the original), so your selector does not match it in your droppable code. You need to figure out what you want to remove and make an appropriate selector.
Update:
After some messing around, I came up with this: http://jsfiddle.net/UXLAE/27/
Your scale code now works in conjunction with drag & drop / sort / sort. You must compare what I did with your source code to understand why it does not work - there were several reasons. Does it help?
Matthew
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