That's the same drophandler that causes dropped files to become 8.3 short filepaths in A_Args on the PC I tested. I don't know why the same thing doesn't happen on your PC.
No, it doesn't look like you're using the python drophandler.
Switching to it might be a way to do what you want to do though. But as I wrote I don't know if there are any issues with using it that way so probably something to research more before using it permanently.