Layered Window -- Strange behavior

[TheDominis]

I'm trying to get a layered window to drag with the mouse, but it isn't even possible to click the window without it exhibiting behavior as if it were created with WS_EX_TRANSPARENT.

#include <iostream>

#include <windows.h>

static const int kWindowHeight = 256;
static const int kWindowWidth = 256;

bool PaintWindow(HWND hwnd) {
    HDC wdc = GetDC(hwnd);
    if(!wdc) {
        std::cout << std::endl << "error. getting dc";
    }
    HDC mdc = CreateCompatibleDC(wdc);
    if(!mdc) {
        std::cout << "error. creating dc";
    }
    HBITMAP mbm = CreateCompatibleBitmap(wdc, kWindowWidth, kWindowHeight);
    if(!mbm) {
        std::cout << std::endl << "error. creating bitmap";
    }
    HPEN pen = CreatePen(PS_SOLID, 12, RGB(255, 255, 255));
    if(!pen) {
        std::cout << std::endl << "error. creating pen";
    }
    if(!SelectObject(mdc, pen)) {
        std::cout << std::endl << "error. select pen";
    }
    if(!SelectObject(mdc, mbm)) {
        std::cout << std::endl << "error. select bitmap";
    }
    if(!MoveToEx(mdc, 0, 0, NULL)) {
        std::cout << std::endl << "error. move to";
    }
    if(!LineTo(mdc, kWindowWidth, kWindowHeight)) {
        std::cout << std::endl << "error. line to";
    }
    SIZE size;
    size.cx = kWindowWidth;
    size.cy = kWindowHeight;
    POINT point;
    point.x = 0;
    point.y = 0;
    BLENDFUNCTION blend;
    blend.BlendOp = AC_SRC_OVER;
    blend.BlendFlags = 0;
    blend.AlphaFormat = AC_SRC_ALPHA;
    blend.SourceConstantAlpha = 255;
    if(!UpdateLayeredWindow(hwnd, wdc, &point, &size, mdc, &point, 0, &blend, ULW_ALPHA)) {
        std::cout << std::endl << "error. update layered window";
    }
    if(!DeleteDC(mdc)) {
        std::cout << std::endl << "error. delete dc";
    }
    if(!DeleteObject(mbm)) {
        std::cout << std::endl << "error. delete bitmap";
    }
    if(!DeleteObject(pen)) {
        std::cout << std::endl << "error. delete pen";
    }
    if(!ReleaseDC(hwnd, wdc)) {
        std::cout << std::endl << "error. release dc";
    }
    return true;
}

LRESULT WINAPI WindowProc(HWND hwnd, UINT msg, WPARAM wParam, LPARAM lParam) {
    switch(msg) {
        case WM_MOUSEMOVE:
            {
                POINTS point = MAKEPOINTS(lParam);
                std::cout << std::endl << "(" << point.x << ", " << point.y << ")";
                return 0;
            }
        // case WM_NCHITTEST: // for dragging
            // return 2;
        case WM_DESTROY:
            PostQuitMessage(0);
            return 0;
        case WM_QUIT:
            return 0;
    }
    return DefWindowProc(hwnd, msg, wParam, lParam);
}

int main(int argc, char* argv[]) {
    WNDCLASSEX wnd;
    ZeroMemory(&wnd, sizeof(wnd));
    wnd.cbSize = sizeof(wnd);
    wnd.lpfnWndProc = WindowProc;
    wnd.hbrBackground = CreateSolidBrush(RGB(0, 255, 0));
    wnd.lpszClassName = L"MagicBlend";
    std::cout << "magic!";
    if(!RegisterClassEx(&wnd)) {
        std::cout << std::endl << "error. registering class";
        std::cin.get();
        return -1;
    }
    HWND hwnd = CreateWindowEx(WS_EX_LAYERED, wnd.lpszClassName, NULL, WS_OVERLAPPEDWINDOW, 0, 0, kWindowWidth, kWindowHeight, NULL, NULL, wnd.hInstance, NULL);
    if(!hwnd) {
        std::cout << std::endl << "error. creating window";
        std::cin.get();
        return -2;
    }
    MSG msg;
    ShowWindow(hwnd, SW_SHOW);
    PaintWindow(hwnd);
    while(GetMessage(&msg, 0, 0, 0)) {
        TranslateMessage(&msg);
        DispatchMessage(&msg);
    }
    return 0;
}

Any help would be appreciated.