I know this problem sounds stupid, and it probably has an easy solution, but still, I haven't found it. It began only recently, but I can't think of any changes I made in my OS. When I drag any folder or executable and drop it on Dosbox.exe it just opens the regular Dosbox screen with Z: drive, instead of emulating the C: drive with the directory I dropped on it.
OS: WinXP (no SP)
AMD Athlon 2500+ XP, Gigabyte GA-7VA F6, 256 DDR