Try deactivating all plugins and check to see if this resolves the problem. If it does, activate the plugins one by one – checking the Widgets after each re-activation – until you find the problematic plugin(s).
Also see:
http://wordpress.org/support/topic/279132
I deactivated my plugins but the problem persists. Thanks for the suggestion though.
Guess what? My problem is resolved – as long as I use Firefox. Must be an IE 8 issue.
Yea, I’m having exactly the same problem in Safari. WordPress 2.8.6. Looks like the widget editing code is broken everywhere EXCEPT Firefox. Thanks for the post/solution, though — I was tearing my hair out. Should have thought to try a different browser! 😉