Hi,
I'm also running Vista Ultimate (32 bit, on a 2 GB 2 core laptop).
VS 2008 RTM 9.0.21022.8
ORM 1.0.711.2403 2007-11ctp (which matches yours).
I saw your note about not being able to drag items from Context window, and just tried it on my setup - no problems!
As your system is more capable - it can't be a performance issue. Anything in your Vista or graphics options that might cause the problem?
Another thought is the base project type you used. I use a VB Windows Form project. I don't know if the restrictions from earlier drops still apply, but it had been limited to Forms or Console project type. A Data project would seem more appropriate, but haven't tried that with ORM for VS08 yet. Also, mine was a new Project (not something i had started from an earlier ORM drop); was yours a clean slate project too? Lastly, though it's at least partly automated now, I manually remove DSL Tools and PLiX old versions before installing new CTPs.
Hope this gives you or KO some clues. BRN..