1.) 504 MB of available RAM
2.) I didn't really pay too much attention. When dragging & dropping, I'm already too lazy to just find the file in the explorer menu, so I wouldn't be so attentive to watch the process...until my screen flickered. I did however, do a 2nd d&d after the first which created the same effect after about 5 or 6 files...there could have been a directory uploaded with files in there as well, which would have issued a CWD command while dragging and dropping.
Perhaps a temporary d&d fix would be to place any dropped items into the %System%\TEMP folder (behind the scenes) before doing the actual upload? I don't know how the internals work, that might not help.
-edit-
Although the above image shows the most extensive GUI problem, as SOON as I begin a drag&drop operation, the GUI is a bit hard pressed. The area on my screen where the Windows Explorer window had been is all white, the screen area is not being redrawn. Seems like something's slowing down the entire process.