That's neat. Not sure if I would deploy it, as it will be hard to explain/teach people how to use it (as I see in other comments already), but I do see the value in it.

It solves the "drag and drop beyond what fits the screen" much better than you can with drag and drop, the awkward auto-scroll-on-nearing-the-edge-thing.

I would say, if you need to reorder many items, it gets a bit disorienting, the whole list moves as it's anchored to the item you are moving. Maybe there is a way to combine drag and drop where this kicks in if you go beyond the bounds of the visible area.

Also don't think this can work well with multiple axis/drop zones.

I wonder if a stack metaphor would work for that. So that N items are no bigger than 2 items.