Hey,
The problem is that you now have 2 X servers running, one on the first "localhost:0.0" display adapter and the second "localhost:0.1" on your second adapter.
If you want to launch apps on specific desktops, set your DISPLAY variable in your environment accordingly before launching them.
This is not what you were looking for right

You want to be able to drag windows across desktops
You need to enable the xinerama extension on your X server
Just run this command: chkconfig xinerama on
And then reboot your machine.
You now have one desktop that spans your 2 displays and you can drag windows accross and even span them accross desktops. If you're running 1280x1024 resolution on both displays for example, your desktop is 2560x1024 pixels resolution.
You only have one DISPLAY now as "localhost:0.0" so you have to use -p or -geometry options on X apps that support them to place a window on the required part of your display.
There is one big issue though, this works for X applications, but you still have 2 different OpenGL pipelines.
If you start an application that uses OpenGL, it will only work on one display (probably the left one if that's where it started)
If you drag or span it to the 2nd display, it will remain black.
Since the desktop icons are OpenGL based, they won't work on the 2nd display neither for the same reason. (except when xinerama is on and they are downgraded to software rendering without AA)
To fix this issue you need to install SGI's MultiPipe software, which will do what xinerama does but for OpenGL.
I haven't done this as my dual head system is an Indigo2,m which is not supported by multipipe, but I think the Octane is.
Google for the SGI multipipe installation PDF manual for details...
Cheers,
Radiance