The CD-RW mode you're after is 'packet writing', which distinguishes it from CD-R. It seems that support for this is in its infancy in Linux, but some console-based development is reasonably mature. This means that Drag & Drop is probably not possible yet within a GUI. For more info, have a look at the CD Packet Writing Project for Linux here:
and the Linux UDF project here:
As Steve said, you can use a CD-RW exactly as you would a CD-R, with the added benefit that you can erase it and start again, which you can not do with a CD-R. Granted, this is not as flexible as Drag & Drop using UDF (as with Windows), but it's still better than burning through CD-Rs. It would seem that Drag & Drop is not too far off though.