Looks like finally Microsoft Windows Phone team did hear request from their users and Windows Phone 7 users will soon see Copy paste feature in their mobile in soon to come update. This was one of the drawbacks which was holding me back to buy this phone. I hope next update brings few more changes requested by many of the users.
As soon as you select a text in Windows Phone 7, you get a copy icon and while pasting you need to use a paste icon. I find this a but of odd to use icons to paste, a simple long press in any area which is editable should have brought that up.
Here is the video which I saw at BGR.