In the above example the following line:
jQuery(".myDiv").find("li").each(function(){
should be:
jQuery(".keywords").find("li").each(function(){
That should enable the list items to be dragged and dropped.
To allow the items to be dropped on the TinyMCE textarea the following code works.
$('#editorcontainer').droppable({
drop: function(event, ui) {
alert('dropped'); //NOW FIRES!
//Dynamically add content
tinyMCE.activeEditor.execCommand('mceInsertContent', false, 'New content.');
}
});