Spatially referenced mark-recapture data are becoming increasingly available, but the analysis of such data has remained difficult for a variety of reasons. One of the fundamental problems is that it is difficult to disentangle inherent movement behavior from sampling artifacts. For example, in a typical study design, short distances are sampled more frequently than long distances. Here we present a modeling-based alternative that combines a diffusion-based process model with an observation model to infer the inherent movement behavior of the species from the data. The movement model is based on classifying the landscape into a number of habitat types, and assuming habitat-specific diffusion and mortality parameters, and habitat selection at edges between the habitat types. As the problem is computationally highly intensive, we provide software that implements adaptive Bayesian methods for effective sampling of the posterior distribution. We illustrate the modeling framework by analyzing individual mark-recapture data on the Glanville fritillary butterfly (Melitaea cinxia), and by comparing our results with earlier ones derived from the same data using a purely statistical approach. We use simulated data to perform an analysis of statistical power, examining how accuracy in parameter estimates depends on the amount of data and on the study design. Obtaining precise estimates for movement rates and habitat preferences turns out to be especially challenging, as these parameters can be highly correlated in the posterior density. We show that the parameter estimates can be considerably improved by alternative study designs, such as releasing some of the individuals into the unsuitable matrix, or spending part of the recapture effort in the matrix.