I've encountered a small problem with 3DS Max 7. Whenever I drag any item on my scene, It ignores the X, Y and Z axis drag-lines and allows free movement but also displays an odd little blue line joining the object to the old object position. At first i thought it could be animation and tweens, but i've removed all animation and the problem still occurs.
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Customize > Grid and Snap Settings > Options > Display Rubber Band.
...but your snaps toggle is off. I dunno man.
I've tried merging it with a new scene, doesn't work. Still a problem, as it's limiting my modelling greatly!