This works correctly for me, using VS2005 and VA 1626 with C++. However it depends on where I drag the item in VA Outline. You need to look at the horizontal position of the dragged item.
Using this code:
static void dragThisIntoRegion() { }
#pragma region EMPTY_REGION
#pragma endregion EMPTY_REGION
If I simply drag the function then I see this:
Note that the dragged item is at the same "level" (horizontal indentation) as the start of the region. When I do this the item is placed after the end region line.
However if I drag it sideways, so that it is shown as a child (greater horizontal indentation) of the start region:
then it is placed inside the region.
