I think it has to do with the element just not being large enough to drag on top of when the list is empty. I added css to your fiddle. Basically copied the css used on the jQuery sortable page.
#list-A ul, #list-B ul
{ list-style-type: none;
margin: 0; padding: 0;
float: left; margin-right: 10px;
background: #eee; padding: 5px; width: 143px;
}
.sortable li
{ margin: 5px; padding: 5px;
font-size: 1.2em;
width: 120px;
}
Here is a fiddle