I did not like this as is and found it confusing, but think it has potential and with a few adjustments could be great. I am sure you might have been planning them, and so congratulations on getting something out for comment rather than over building.

1. It will be more intuitive if you can long press or click on the item rather than have to click the "pick" link. That behavior is too deeply ingrained from drag and drop at this point.

2. It would help to show place locations where it will be inserted between objects. I found myself instinctively scrolling up and down to line it up perfectly because it just didnt feel likely to succeed if it wasnt properly placed in the middle, and the absence of visual cues make it seem like I needed to me more accurate with my placement.

Overall cool concept and good work. Keep it up.