Sortable: Handles outside sorting element do not work

We have a situation where, similar to basecamp's task list, the editing options for content appear outside the pixel area of the element that will be sorted.

Look at the "FAQ":

http://www.czarweb.com/demos/jquery-layout/

When hovering over an item to edit, the edit/delete/sort links appear outside the box to the left. I had planned to use the same area for allowing sorting, but a strange error occurs when I do so:

When you click on the "Sort FAQ" link and drag up and down to sort the item, the sorting does not work unless your mouse position is inside the box with the other sortable items. So since the sortable handle's actual x/y position is outside the sorting container, the mouse is also outside the container and thus cannot sort until the user moves their mouse cursor to the right inside the sorting container.

This is a bug because the actual DOM position of the handle is still inside the sorting element, but the actual x/y position is not, and it prevents the list from being able to be sorted as expected by the end user.