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The code
CODE
/////////////////
var squarePress = false;
border_mc.onEnterFrame = function() {
    /////////////////////////////////
    //Moves "square" to the left
    /////////////////////////////////
    if (square._x>border_mc._x) {
        if (Key.isDown(Key.LEFT)) {
            square._x -= 5;
        }
    }
    /////////////////////////////////                    
    //Moves "square" to the buttom
    /////////////////////////////////
    if (square._y<border_mc._y+border_mc._height-square._height) {
        if (Key.isDown(Key.DOWN)) {
            square._y += 5;
        }
    }
    /////////////////////////////////                    
    //Moves "square" to the top
    /////////////////////////////////
    if (square._y>border_mc._y) {
        if (Key.isDown(Key.UP)) {
            square._y -= 5;
        }
    }
    /////////////////////////////////                    
    //Moves "square" to the right
    /////////////////////////////////
    if (square._x<border_mc._x+border_mc._width-square._width) {
        if (Key.isDown(Key.RIGHT)) {
            square._x += 5;
        }
    }
    /////////////////////////////////                    
    //Moves "square" with the mouse   // Start
    /////////////////////////////////
    if (squarePress == true) {
        //////////////////////////////////////////
        //limits mouse x placement to the left
        /////////////////////////////////////////////
        if (_root._xmouse>border_mc._x+square._width/2 && _root._xmouse<border_mc._x+border_mc._width-square._width) {
            _root.square._x = _root._xmouse-square._width/2;
        } else {
            if (_root._xmouse<border_mc._x+border_mc._width/2) {
                _root.square._x = border_mc._x;
            } else {
                _root.square._x = border_mc._x+border_mc._width-square._width;
            }
        }
        ////
        //limits mouse Y placement to the top
        ////
        if (_root._ymouse>border_mc._y+square._width/2 && _root._ymouse<border_mc._y+border_mc._height-square._height) {
            _root.square._y = _root._ymouse-square._height/2;
        } else {
            if (_root._ymouse<border_mc._y+border_mc._width/2) {
                _root.square._y = border_mc._y;
            } else {
                _root.square._y = border_mc._y+border_mc._height-square._height;
            }
        }
    }  
};
/////////////////////////////////////////
// grab the square
//////////////////////////////////
square.onPress = function() {
    squarePress = true;
};
square.onRelease = function() {
    squarePress = false;
};
square.onReleaseOutside = function() {
    squarePress = false;
};