Right, "Set as Target Collection" was available in LR2 because my collections created with LR2 display this on the right click. As far as I know, all these collections are normal - I don't know how to recognize the difference between smart and normal. As well as I can remember there was no error message. However, due to a hard drive failure,LR3 was installed, various library files were copied over to the new drive. In all other matters of Lightroom I've tried everything looks good.
Some hints that may be helpful-
A Collection SET icon looks like a Shoe box.
A Standard Collection icon looks like layers of pages.
A Smart Collection icon looks like layers of pages with a small gear wheel in a corner.
And also there are 'Book' and 'Slideshow' Collection icons.
You cannot Drag & Drop photos onto a Collection SET. (SETs can only contain other Collections)
You cannot Drag & Drop photos onto a Smart Collection. (These are created automatically )
*You must Drag & Drop photos to a Standard Collection by Click & Hold the mouse cursor ON an IMAGE portion of the preview (NOT the grey border around the image!)
You Right-Click on a Standard Collection to make it the "Target" Collection. (a + shows next to the Collection name)
You can change the Target Collection at any time by a Right-click on any other Standard Collection.
You easily add photos to the Target Collection by selecting the photo (or multiple photos) and press keyboard .
The "Quick" Collection (shown in the CATALOG panel) is often used as the Target Collection (as default).