It is impossible to paste a copied image to the Image pane: there is no Paste option when tapping on the pane. iPadOS 14, Safari.
And note, please: currently the pane is not correctly cropped from the lower side.
Thanks for pointing out the cropping issue, will fix that.
As for pasting, this behavior is indeed targeted at desktop browsers. Unfortunately, I believe this is an iOS limitation, as iOS will not show you the paste option if you press on anything that is not an actual text input.
We will probably just change the message on mobile devices to not include drop/paste (as drag-and-drop is not supported either). Ironically due to this you wouldn’t see the change on your iPad by default anyway, but not sure there is anything we can do about that 
Is this something that might change once the new WYSIWYG editor is out (or by hooking the paste event in the main text field?)
Linear’s PWA certainly supports pasting images inline in the text editor, presumably using contenteditable or similar.
On web as well, it would be nice to be able to simply hit ‘Cmd+V’ whilst typing and have an image pasted inline.