The solution was thanks to ElDiabloConCaca. I was trying to move the icon from Finder under "places" not via Mac hard drive. So thanks for the detailed instructions which solved the problem. And Misterme; sorry about the misspell on dock which confused the issue. I am a doc so I guess my mind...
I used to have an application icon on my doc so that I could easily look at all my applications. It has disappeared. I cannot drag the application icon from Finder to any where on the doc. Applications is in the normal place in finder.
