With some help from the Win32 Advanced Perl group, here is what I have so far. I started playing with getWindowDC and Rectangle functions but I am having problems setting the drawn Rectangle as transparent. Also, when I am done dragging, how do I dispose of the DC and refresh all the windows?

#!perl -w
# Left-Click on the target image, and drag
use warnings;
use strict;

use Win32::GUI;
use Win32::API;
use Win32::GUI::BitmapInline();

my $mw = Win32::GUI::Window->new(
  -name => "MainWindow",
  -title => "Win32::GUI Spy++",
  -pos => [100,100],
  -size => [100,100],
  );

my $cursor = get_cursor();
$mw->AddLabel(
  -name => "Target",
  -icon => $cursor,
  -notify => 1,
  -onMouseDown => \&mouseDown,
  -onMouseUp => \&mouseUp,
  -onMouseMove => \&mouseMove,
  );

$mw->Show();
Win32::GUI::Dialog();
exit(0);
###########################
###########################
sub mouseDown{
  my $label = shift;
  Win32::GUI::SetCursor($cursor);
  $label->SetCapture();
  return;
  }
################
sub mouseUp{
  my $label = shift;
  $label->ReleaseCapture();
  return;
  }
#################
sub mouseMove{
  my ($label, $x, $y) = @_; # x,y in client co-ordinates
  return unless Win32::GUI::GetCapture();
  Win32::GUI::SetCursor($cursor);
  my $hwnd=getWindowXY($x,$y);
  my $class=getWindowClass($hwnd) || '';
  my $text=getWindowText($hwnd) || '';
  $text=substr($text,0,30) if length($text) > 30;
  my $exe=getWindowExe($hwnd) || '';
  my ($left,$top,$right,$bottom)=getWindowRect($hwnd);
  my $hdc=getWindowDC(getDesktopWindow());
  my $ok=drawRectangle($hdc,$left,$top,$right,$bottom);
  #print qq|$hwnd\ ($x,$y) [$exe] {$class} "$text"\n|;
  return;
  }
###############
sub getWindowDC{
  #usage: my $hwnd=getWindowDC($hwnd);
  #info: returns the handle of a device context for the specified wind
+ow.
  my $hwnd=shift || return;
  my $GetWindowDC = new Win32::API("user32", "GetWindowDC", ['N'], 'N'
+) || return $^E;
  my $hdc=$GetWindowDC->Call($hwnd);
  return $hdc;
  }
###############
sub getDesktopWindow{
  #usage: my $hwnd=getWindowDC($hwnd);
  #info: returns the handle of a device context for the specified wind
+ow.
  my $GetDesktopWindow = new Win32::API("user32", "GetDesktopWindow", 
+[], 'N') || return $^E;
  my $hwnd=$GetDesktopWindow->Call();
  return $hwnd;
  }
###############
sub drawRectangle{
  #usage: my $ok=drawRectangle($hdc,$left,$top,$right,$bottom);
  #info: returns the handle of a device context for the specified wind
+ow.
  my $hdc=shift || return;
  my $left=shift || 0;
  my $top=shift || 0;
  my $right=shift || 0;
  my $bottom=shift || 0;
  my $Rectangle = new Win32::API("gdi32", "Rectangle", ['N','I','I','I
+','I'], 'N') || return $^E;
  my $ok=$Rectangle->Call($hdc,$left,$top,$right,$bottom);
  return $hdc;
  }
###############
sub getWindowXY{
  #usage: my $hwnd=getWindowXY($x,$y);
  #info: returns the window handle of window at x,y
  my $x=shift || return;
  my $y=shift || return;
  my $WindowFromPoint = new Win32::API("user32", "WindowFromPoint", ['
+N','N'], 'N') || return $^E;
  my $POINT = pack("LL", $x, $y);
  return $WindowFromPoint->Call($x,$y);
  }
###############
sub getWindowClass{
  my $hwnd = shift || return;
  my $GetClassName = new Win32::API("user32", "GetClassName", ['N', 'P
+', 'N'], 'N') || return $^E;
  my $name = " " x 1024;
  my $nameLen = 1024;
  my $result = $GetClassName->Call($hwnd, $name, $nameLen);
  if($result){return substr($name, 0, $result);}
  }
###############
sub getWindowExe {
  #GetModuleFileName
  my $hwnd = shift || return;
  my $GetModuleFileName = new Win32::API("kernel32", "GetModuleFileNam
+e", ['N', 'P', 'N'], 'N') || return "unable to create new API";
  my $name = " " x 1024;
  my $Len = 1024;
  my $result = $GetModuleFileName->Call($hwnd, $name, $Len);
  if($result) {return substr($name, 0, $result);}
  return "unknown";
  }
###############
sub getWindowRect {
  my $hwnd = shift || return;
  my $GetWindowRect = new Win32::API("user32", "GetWindowRect", ['N', 
+'P'], 'N') || return $^E;
  my $RECT = pack("iiii", 0, 0);
  $GetWindowRect->Call($hwnd, $RECT);
  return wantarray ? unpack("iiii", $RECT) : $RECT;
  }
###############
sub getWindowText{
  my $hwnd = shift || return;
  my $GetWindowText = new Win32::API("user32", "GetWindowText", ['N', 
+'P', 'N'], 'N') || return $^E;
  my $title = " " x 1024;
  my $titleLen = 1024;
  my $result = $GetWindowText->Call($hwnd, $title, $titleLen);
  my $text=substr($title, 0, $result);
  if($text){return $text;}
  #if no result send a WM_GetText message to the window
  my $WmSendMessage = new Win32::API("user32", "SendMessageA", ['N','N
+','N','P'],'N') || return $^E;
  my $WM_GETTEXT=13;
  my $txt = " " x 2048;
  my $textLen = 2048;
  $result = $WmSendMessage->Call($hwnd,$WM_GETTEXT, $textLen, $txt);
  $text= substr($txt, 0, $result);
  return $text;
  }
#####################
sub get_cursor{
return Win32::GUI::BitmapInline->newCursor( q(
AAACAAEAICAAAA8AEAAwAQAAFgAAACgAAAAgAAAAQAAAAAEAAQAAAAAAAAEAAAAAAAAAAA
+AAAAAA
AAAAAAAAAAAA////AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAHwAAAGDAAACbIAABQFA
+AApsoA
AUAFAAECgQACoAqAAqgqgAIBAIACqCqAAqAKgAECgQABQAUAAKbKAABQFAAAJsgAABgwAA
+AHwAAA
AAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAAA//////////////////////////////////
+g////g
D///wAf//4gj//8YMf/+ODj//nx8//wMYH/8A4B//AOAf/wDgH/8DGB//nx8//44OP//GD
+H//4gj
///AB///4A////g///////////////////////////////////////8=
) );
}
[download]