ok, so you are now running the new updated iTunes and when it updated it cleaned out your library, so that you had to go to the iTunes folder and re-build your library by drag and drop? - correct?
it is strange that it allows you drop the tunes but won't effect them in the library. have you got other apple devices like and iPhone or iPad? perhaps you could do connect them to your computer and drag and drop tunes onto those devices. 10.5 /iOS 5 allows this now.
if this is ok, perhaps you need to reinstall iTunes 10.5 on your computer again..
that's all i can contribute, not much, but hope it helps in some way.
J
