SOLVED – OUTLINE GESTURE MUST BE ENABLED
Update:
The issue was resolved by enabling the Outline Gesture in the Outline view. This is done by tapping the hand icon located in the bottom toolbar (see image below).
This icon must be turned ON (highlighted in blue) for manual reordering of notes to work in Outline view.
When the Outline Gesture is off, drag-and-drop functionality is disabled, even if Edit mode is active.
If you’re unable to move text or excerpts in the Outline, make sure this gesture toggle is enabled.