This was driving me nutso after I installed Lion. I use the trackpad function where I tap instead of actually clicking on the trackpad. I fixed the issue of tap not actually working easily enough via System Preferences > Trackpad > Point & Click > Tap to Click. But the thing that was confusing the hell out of me was how to have the same old functionality that I was used to when double tapping and dragging things. It simply wasn’t working and I couldn’t find the setting for it. Until now. So I’m sharing the setting with you.
Go to System Preferences > Universal Access and click on Mouse & Trackpad tab. Then click on Trackpad Options button and make sure that Dragging (with or without drag lock depending on your preferences) is checked. Voila. Good old double click and drag is working again.