As the title suggests, is it possible to make new selections whilst in a draggerContext tool? If so, which direction should I head, and if not, is there a possible work around?
I don't see why not. Which event would trigger the selection change?
The script is just a simple script that alters the extrudes local translation in z via dragging left to right. The idea is, when I press shift+mmb, it will clear the current selection, allow me to do a new selection, and then perform a new extrude that would allow me to translate by dragging left to right again.
maybe this isn't the same functionality you are looking for, but you can use the q and y keys to accomplish something like this. q is the default hotkey for the "select" context tool, at which point you can make your new selection, and then y will activate the last used tool, in this case your extrude draggerContext.
That's a little slow for my tastes 
I'm still curious about this. Joojaa, or anyone have any idea? At least a step in the right direction! I'm curious to know how to make a new component selection, basically the way the select tool works, except while in a draggerContext.
Or is there a way to tell what component is under the mouse pointer?
short - no.
component under pointer takes a bit, and may be to heavy (but give it a go, its been a while since i looked at this problem). reference the fellow's script that does soft selection, he uses slectionConstraints i think ...
the way i do it is to exit the dragCtx into selection mode (on mmb-shift, say), and create scriptJobs to handle selection events and returnign to dragCtx, or what ever. simply, its just a bit of a PTA to wranggle, but doable. do it once, and you'll use the code again and again.
c.
Had a feeling that would be case. I've looked at Mr Hawks magnet tool to see how he did the selection. It makes a bit of sense to me, but not all that much. I'll have to take a closer look.
I imagine the api has a better function to retrieve what component is under the mouse pointer, or closest to?