I hit cancel and then tried again using menu commands and received the same screen.
I then loaded up FireFox and the copy/paste went fine.
Not sure what's going on...
BTW - I just used the paste function of IE8 for the text above (copied that text from Notepad into the editor screen here) and it worked fine. So, it appears to be limited to copying from this editor screen and pasting to this editor screen (if that makes sense).