It looks like the inline event.drag isn't compatible with jQuery 1.9.1.
I can confirm this. Replaced event.drag with the latest version (2.2) and started working.
Fixed inline event.drag's use of $.event.handle.
This resolves issue #964.
My first thought was to upgrade to event.drag 2.2, but it looks like the authors are more aggressive about requiring recent jQuery versions than we are; it needs 1.7+. In fact we officially still support jQuery 1.2.6, and event.drag 1.5 is the last version to support jQuery 1.2.x. We probably don't need to support jQuery back that far, but I'd rather deal with that in 0.9, not right before we release 0.8.
For now I took a look at why the script was failing, and it's actually very simple: on line 117 of the original source the plugin uses $.event.handle, an internal undocumented function that was removed in 1.9.x. Fortunately there is a function $.event.dispatch that does the same thing, so it was an easy fix.
Updated credits for #964 navigate event.drag fix.