What steps will reproduce the problem? 1. Open Pencil or create new document 2. Drag a common shape 3. Right click on the shape and select "With Shadow"

What is the expected output? What do you see instead? Expected drop shadow. See nothing.

What version of the product are you using? On what operating system? Pencil 1.2.0 on Mac OSX Snow Leopard 10.6.4

Please provide any additional information below. Dragging new shapes/other elements is also flaky. Sometimes can't drag at all.

check that you are not hiden heavy element in Menu Shape > Hide Heavy Element

Worked for me, on Windows it's Menu -> View -> Hide Heavy Elements