I started with the DnD example and have some DIVs with class 'dojoDndItem' and all's fine until I give one of the DnD items a widget type like so:
<div class="dojoDndItem" dojoType="foo.myWidget"> ... </div>
and then it can still be dragged around but it can't be dropped on the same target(s) anymore? Its as if the 'dndType' somehow gets changed? How does it work?

It is all depends on widget.
It is all depends on widget. Your best bet is to wrap it in div like that:
<div dojoType="foo.myWidget">...</div>
</div>
yes, probably much wiser to
yes, probably much wiser to keep em seperate