Take a look at this video demonstrating copy and paste functionality on Windows Phone 7 posted by WMPowerUser.
A user can tap a word in mail, IE, Word, etc and that word is then highlighted with arrows on both sides. One can then drag to the left or right to include more words. An icon appears above the highlighted word(s) (looks very similar to the copy icon in Office 2010) to copy. Open a new document, once the cursor is set/blinking and the soft keyboard appears, a paste icon (again, looks the same as the paste icon in Office 2010) is shown just above the top row of letters.
In "Messaging", a user can long press a specific IM which open up the hidden menu that now includes copy. Paste where you wish
@Jay Kay - Everyone seems to agree that the touch response and keyboard on WP7 are the best on the planet; better than (or at least just as) the iPhone. The guy is holding the camera with one hand and typing with the other. Try doing that on the iPhone and post a video show how much accurate you are. I've owned all iPhones except the iPhone4 and I believe it's the best mobile phone so far, but it's just annoying to hear people trashing other mobile devices just because their ignorance doesn't allow them to say anything else. Ugh!
i never wanted to hurt anyone's feeling but we are still talking about devices not people, and if you say that touch of WP7 is best i'm sorry its not that only WP7 ppl will agree with it not me atleast, i'm not tashing any other gadget, they all followed apple touch phone pattern, so in any case apple will be the best and will be the superior, i also like HTC and other devices but its always windows that makes good hardware bad.