Bitt, you're preaching to the choir as far as I'm concerned. I can't say it's one of the reasons I don't use my iPod a lot more, but the situation you mentioned has always bugged the hell out of me. I think we'll eventually see a solution. The platform needs it for a number of application classes to really shine.

BTW, the iPhone does have Copy and Paste and it's apparently the best implementation among all handheld devices.