Set to always snap windows.
I think I might have stumbled across some behaviors that might help narrow down what is going on.
Lets say I open a fresh instance of Notepad. It launches in windowed mode (i.e. not fully maximized). Everything snaps perfectly: I can drag it anywhere in the existing split or a different split, and it snaps to monitor edges or other application windows. Perfect!
However, I now maximize Notepad to take up the full split. When I try to drag the maximized application to another Split (all in a single mouse stroke), no snapping occurs at all (regardless of how I hold the shift key, as you outlined earlier). Perhaps this is the intended behavior? Will snapping only occur when I drag a non-maximized window?
Here's where things get tricky to describe.
When I drag the maximized application to another split in either of the following 2 ways, snapping continues to work perfectly:
hold shift, click, and drag window to another split.
click (but do not move mouse), hold shift, and drag window to another split.
In both scenarios, Notepad is not maximizing itself in the new split (which is to be expected given the shift key is being held). I can continue to snap the Notepad app anywhere I choose.
When I drag the maximized application to another split, not touching the shift key at all, Notepad correctly maximizes to the new split. However, when I put Notepad back to windowed mode (i.e. not fully maximized), it will never snap to any monitor edge or other application no matter what I do.
Something about dragging a currently maximized window from one split and keeping it maximized in the destination split, causes all snapping to fail once that application is put back into windowed mode. The only way I can fix this and regain snapping functionality is by closing and reopening the app.
I've spent quite some time testing and writing this post, and have replicated this issue on 2 completely different machines.
Side note: unchecking Window Management -> Show monitor selector when dragging non-maximized windows to split monitors helped me identify this issue.
Hope this detail helps. Would be grateful if you could confirm my question in the 4th paragraph and let me know if you can replicate the snapping issue.