You can only do a manual sort when you are working within either a single folder or a single collection. So, if you want to sort images manually that are across a range of folders (or collections) you first need to put them into a single collection, then sort.

Lightroom refers to this sort order as “User Order”.

Once you are in either a subfolder or a collection, then be sure to grab the image itself, not the border, and drag and drop in the order you desire. You can do this from the Grid view of the Library module or the Film Strip in any module.

In 1.1+, go to Library > Include Photos from Subitems, and uncheck it so that images are only shown for the currently viewed item and not its subitems too.