Steps to reproduce:
create a container notecard
create a 2nd notecard and set it to no modify for next owner
try to drag the 2nd notecard onto the first one
expected: embedded notecard (link)
result: cursor changes to not allowed and it does not allow you to do the above
"Embedding items in a notecard
Similar in function to email attachments, you can drag-and-drop fully-permissive (Modify, Copy, and Transfer permissions must all be enabled) items from your inventory to a notecard. They can be landmarks, objects, scripts, etc."
This is expected behaviour, not a bug.