I have an inner div inside an outer div. The inner div is draggable and outer is rotated through 40 degree. This is a test case. In an actual case it could be any angle. There i
This basically will do what you need though it is buggy. Bind the drag event handler, intercept the ui object and modify it to use the offset X and Y of the parent element. All of the X, Y, top, left etc. are in those objects. I will try to get you a better example sometime when today when I get a bit more time. Good luck!
http://jsfiddle.net/kB4ra/107/