I have been working in FrontPage 2003 but its a bit dated and wanted something quicker and more modern hence the CoffeeCup purchase.

Simple question - I am clicking on the add shape button. The little grey square of options appears; I choose the shape then attempt to drag it to the page. It won't drag. I have attached a screenshot. What am I missing here please?

Assuming you are using VSD.
First you click on the shape you want, then you go to the page and drag out a rectangle in which the shape then will appear. You can then edit the shape and position it.

By drag out Inger means you click and hold on the design screen with your mouse and move the mouse and the shape will show and get larger the father you drag out. If you have done this several times without success you may want to hit ctrl + a while on that page. This will reveal any shapes you placed on the screen that are only one pixel in size and might be to small to see. This way you can delete those.