In the past I have been able to drap and drop songs from my iTunes that aren't on Spotify into playlists and they play as local files. Recently, though, I haven't been able to add any of my local files! Both iTunes and Spotify are fully up to date. Can anyone help?!
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This feature is not in the new version.
Spotify plans to bring some features back, but it is currently not known if the feature you mentioned will be coming back.
You can still add local files to Spotify. Go into the settings and under "Local Files" you can import the source folder that contains the local files.
After you do that, the local files will appear in the "Local Files" section.
Find the song and then drag it over to a playlist.