Some thoughts - Very much on the ideas rather than implementation end though...
1 - Provide both up and down arrows and drag and drop, and monitor which is more popular, which type of users use which etc, then tailor from there once you have some data
2 - Add a "random" button which generates the order randomly - could be useless, could be fun depending on your app
3 - Add a "display order" field by the side of each item and allow the user to manipulate it (but make sure that you have some code to auto update the rest of the numbers when one changes) personally I think this could be very confusing, but for some users it might work
4 - Instead of drag and drop in place, have users drag to a new list
5 - For a very simple version, have a "favourite" check box, and then have the list just show the favourites first, (in alphabetical order or something)
6 - Have groups - you assign a group number to an item, all the group ones appear first, followed by group 2 etc
Hope this random rambling has been useful, if i think of anything more I'll come back...