I'm having the same problem. I tried both approaches, dragging the linkmarlet and also bookmarking. Either way, I'm getting a 404 error inside the popup window.
Plugin version 0.5.2 and WP 3.5
I tried the plugin on a site that is on another host (Bluehost) and it worked. The sites where I wasn't successful are on Hostgator. But because the two hosts are basically identical, I don't think the host matters in this case.
Perphaps an important factor: I have multiple installations of WordPress on the same domain (in directories, not subdomains; btw, this is not a multisite). Whenever I try the Linkmarklet, it attempts to request the correct URL (linkmarklet plugin location), but the admin bar shows the root site user as logged in, although that user doesn't exist on the installation I have the Linkmarklet on. Does my explanation make sense?
Any help would be greatly appreciated! I have been searching far and wide for a plugin like Linkmarklet. Thank you in advance!
EDIT: Actually, the host might matter after all. I tried the plugin on another domain (that has only 1 WP installation and is hosted on the same account as the sites in question) and I'm getting a 404 there, too.