Microsoft had confirmed that copy and paste functionality would not be available in Windows Phone 7 at the time of first release. They did not give a timeline for its appearance. However, some developers at XDA have been going through the Windows Phone 7 developer tools, and have found some lines of code within 'officeres.dll' that seems to indicate the presence of copy&paste. This could mean that it will be present straight from the first release, or, that the code would be activated after certain updates.
The code seems to be within menu options, leaving people to believe it will be present in MSOffice or other native applications.