Hi,
You shouldn't have to drag the images into the version 12. Converting the catalog should preserve all the links. The one thing it will need to do is rebuild all the thumbnails - that may take a little while.
If you close version 12 and open the version 8 organizer, are all the images there?
If you go to the File menu and select Reconnect -> All images does it find any missing ones?
Also, go to the Help menu and select System Info - not the catalog location.
Is the catalog that you converted earlier, the one that you just noted?
Brian