hmmm this problem sounds very familiar but the root of my problem was my default music player was Windows Media Player and NOT iTunes. When the settings were this way i could not drag and drop newly downloaded songs from LW into iTunes.

i solved my problem by deleting and re-instaling iTunes as my default media player but i guess you dont have to go through all this trouble, just change your current default media player to iTunes.

i hope this helps anyone with the same prob... :D ;) :D