As you're sorting these, the image placeholder used by jQuery Sortables has no SRC and therefore cannot have a width/height applied to it. Note that on Chrome, this example will work fine. Firefox is the issue here. I haven't tried any other browsers.
As you're sorting these, you'll notice that it correctly leaves space open underneath the element you're sorting which is just as big as the element itself. This is how example 1 should operate but can't due to how empty images are handled by some browsers.