Can a batch file capture its own location?

I want a batch file to be able to reference its own location in the folder
tree.

I create the file C:\FOOBAR\MYSELF.BAT:

@echo off
echo This batch file is in folder %CD%
pause


This returns, as expected, the following output:

This batch file is in folder C:\FOOBAR


However, if I launch the file by dropping another file onto it, I get this:

This batch file is in folder C:\Documents and Settings\David

which is my home directory.


How can I capture the actual physical location of the batch file even when
it is launched by having a file dropped on it?

Special bonus question: Why does the command-line interpreter behave in this
way?

Thanks.

David