Your "works" file works for me, although I'm missing one of the modules you loaded (short-inset-names), which apparently is not critical.
Your "doesn't work" file had two problems when I tried to fix. The first was that it had no title (I added one). The second was that the environment where you wanted the drop cap was "Standard" as opposed to "Initial". I changed the environment to "Initial", put the leading 'A' in the short title inset (which works for "Initial" but makes no sense for a standard environment, which takes no options) and it worked fine. Paul
