Special thanks to Virtual1 at the MacFixIt forum who provided this solution...
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delete (home)/Library/Preferences/com.apple.dock.plist and logout/login. Dock should reset to defaults, and begin working normally again.
It's possible it may not let you delete that file. (which would cause your problem) If that's the case, select it, get info, make sure you are the owner and have read/write access, then logout/login and it should work ok.