When you drag+drop a DWG file onto a tool palette, the program knows what to do and creates a tool to insert that drawing file as a block (or optionally an xref). Depending on your needs however, an unfortunate side effect is that the full path of that DWG file is saved in the tool palette. If you are a single user or in a small office this probably is not a problem. If a user is not paying attention and creates this tool from a local drive or from a temporary location, he/she will find that the tool will stop working and/or point to the wrong block some day.
For larger office environments, if you move these drawings to a new server then there is no easy way to fix or change the paths. Autodesk has a KB article on this where they explain a workaround. It is a back-door method of manually editing the files that make up the tool palettes.