Index: lams_flex/LamsAuthor/src/org/lamsfoundation/lams/author/components/activity/ActivityComponent.mxml
===================================================================
diff -u -rb18306871e780d0266af4b3135c37780f09d2b72 -r25f9a8b7b24bda28d71c569daccc9a30faef5e18
--- lams_flex/LamsAuthor/src/org/lamsfoundation/lams/author/components/activity/ActivityComponent.mxml	(.../ActivityComponent.mxml)	(revision b18306871e780d0266af4b3135c37780f09d2b72)
+++ lams_flex/LamsAuthor/src/org/lamsfoundation/lams/author/components/activity/ActivityComponent.mxml	(.../ActivityComponent.mxml)	(revision 25f9a8b7b24bda28d71c569daccc9a30faef5e18)
@@ -21,13 +21,18 @@
 			import mx.controls.Label;
 			import org.lamsfoundation.lams.author.components.transition.TransitionComponent;
 			
-			public var xpos:int;
-			public var ypos:int;
+			// Activity title label
 			public var title:Label;
 			
+			// Center position of the activity component
 			public var centerX:int;
 			public var centerY:int;
 			
+			// Point of mouse during drag
+			public var mouseOffSetX:int;
+			public var mouseOffSetY:int;
+			
+			// Transtitions
 			public var transitionIn:TransitionComponent
 			public var transitionOut:TransitionComponent;
 			
@@ -59,7 +64,15 @@
 				        
 				        if (activityComponent.isDragable) {
 				        	var ds:DragSource = new DragSource();
-				        	ds.addData(activityComponent, "img");               
+				        	ds.addData(activityComponent, "img"); 
+				        	
+				        	// Set the offset for dropping the activity to the local mouse position
+				        	activityComponent.mouseOffSetX = event.localX;
+				        	activityComponent.mouseOffSetY = event.localY;  
+				        	
+				        	this.setStyle('borderStyle', 'solid');
+							this.setStyle('borderColor', '#66CCFF');         
+				        	
 				        	DragManager.doDrag(activityComponent, ds, event);
 				        	setCenter();
 				        }
@@ -117,6 +130,7 @@
 			    systemManager.removeEventListener(MouseEvent.MOUSE_MOVE, systemManagerMouseMoveHandler, true);			
 			    systemManager.removeEventListener(MouseEvent.MOUSE_UP, systemManagerMouseUpHandler, true);
 			    systemManager.stage.removeEventListener(Event.MOUSE_LEAVE, stageMouseLeaveHandler);
+			    this.setStyle('borderStyle', 'none');
 			}
 			
 			private function systemManagerMouseMoveHandler(event:MouseEvent):void
Index: lams_flex/LamsAuthor/src/org/lamsfoundation/lams/author/controller/AuthorController.as
===================================================================
diff -u -rb18306871e780d0266af4b3135c37780f09d2b72 -r25f9a8b7b24bda28d71c569daccc9a30faef5e18
--- lams_flex/LamsAuthor/src/org/lamsfoundation/lams/author/controller/AuthorController.as	(.../AuthorController.as)	(revision b18306871e780d0266af4b3135c37780f09d2b72)
+++ lams_flex/LamsAuthor/src/org/lamsfoundation/lams/author/controller/AuthorController.as	(.../AuthorController.as)	(revision 25f9a8b7b24bda28d71c569daccc9a30faef5e18)
@@ -61,14 +61,15 @@
 			var canvasBox:CanvasBox = Application.application.canvasArea.canvasBox;
 			
 			// Get the current mouse point, and convert it to co-ordinates in CanvasBox
-			var currentMousePoint:Point = new Point(UIComponent(event.currentTarget).mouseX, UIComponent(event.currentTarget).mouseY);
+			var comp:UIComponent = UIComponent(event.currentTarget);
+			var currentMousePoint:Point = new Point(comp.mouseX, comp.mouseY);
 			currentMousePoint = canvasBox.globalToLocal(currentMousePoint);
 			
 			if (event.dragInitiator is ActivityComponent) {
             	var activityComponent:ActivityComponent;
             	activityComponent = event.dragInitiator as ActivityComponent;
-            	activityComponent.x = currentMousePoint.x;
-          		activityComponent.y = currentMousePoint.y;
+            	activityComponent.x = currentMousePoint.x - activityComponent.mouseOffSetX;
+          		activityComponent.y = currentMousePoint.y - activityComponent.mouseOffSetY;
           		activityComponent.setCenter();
           		activityComponent.updateTransitionPositions();
             } else if (event.dragInitiator is LearningLibraryEntryComponent) {