You want to be able to drag the images only on the frame object, right?
This should do it:
+ Text: [negated] Text is "" (case: No)
+ System: frame at (MouseX,MouseY)
-> ImageManipulator: Load image Text.Text
-> ImageManipulator: Resize to 128 x 128
-> ImageManipulator: Copy image to sprite picture
+ System: Always (every tick)
-> Text: Set text to ""
I haven't found a way to get the file location before the file is dropped, so you can't have the image previewing before the drop.