Things changed after iOS 3.2.2; it won't work if you drag-drop pictures into simulator's Safari. Here is the working method for iOS 4.1.
1. start "Photos" app in simulator.
2. Drag and drop a picture into "Photos".
3. The picture will be opened in Safari. Click the picture and hold until you see the "Save Image" menu. Then save it.
Go back to "Photos", you can see the pictures you just saved.