I'm pretty new to physics engines (this is the first one I've used), and I've run into some problems - hopefully people here have already encountered them and found some solutions

What I'm trying to do is have some objects on the screen, floating in liquid. To simulate the liquid, I've set the damping factor of the space. The objects (circles) interact well with each other, but I need to be able to pick one of them and drag it around the screen. That's when troubles start.
I've used the approach from cpMouse to drag the object around the screen, but I've had two problems. One was that it was easy to drag this object off the screen, but I've solved it by simply resetting the objects' position if they are out of bounds.
The other problem I have is that when you drag one object into the others they behave very strange - either they bounce off very very fast, or start spinning strangely. This especially happens if you put a few objects in a corner, and then try to "squeeze them out" with the object you're dragging. They seem to explode and start going off in all directions.
I assume it's expected behavior from the physics engine, but has any of you had such problems and what would be a good way to go about solving it? What exactly is causing this behavior?
Thanks,
Ivan