Yes it is.
You shouldn't rely on your drag and drop functionality as the only way to upload files. I agree it is an 'advanced' features which many users don't know. Many users are clumsy with there mouse, so dragging a file across the screen can be hard, especially on trackpads! But in many cases, this method is a way faster.
You ask 'Aren't users frustrated by all the steps'? You could reverse the question: Aren't users frustrated by the steps needed to upload files via the normal method?
- Open a Window:
Opening a window (I assume you mean a finder/explorer window) is an equally frustrating job then using the 'Browse files' button: you need one click. But, in many cases I found the files I want to upload are already open in a window. (I just worked on them, or just connect a device and they pop-up automatically...)
- Browse your files:
This is equally as frustrating as your the traditional method. Like above, in many cases there is already a window open with your files! This is a huge win! You can skip the whole browse-to-files steps and save many clicks. Traditional upload-dialogs start in your root folder.
- Ensure windows are overlapping:
Why do your windows need to be overlapping? I never do this. You just drag them to the application-icon or if you are in the wrong browser-tab: drag them on the tab of your destination. Advanced users also use command-tab/alt-tab to switch application without the need to drag it over the icon.
- If you drop them in the wrong location in your File explorer, just hit undo and all changes are reversed.
A huge advantage of drag en drop is the ability to drop files on locations where there is no visible uploader, but the context (like an online file explorer) indicate it should be possible. This save you the trouble of navigation to a menu to find the upload feature. Note that the (web)application where you are dropping the files need to facilitate the feature the right way, for example accepting uploads to be dropped anywhere in your window instead of on a specific area.
I use them both, depending on the context.