Copy and Paste from Virtual PC has stopped working
Copy/Paste support is provided by the Virtual Machine Additions. Maybe you could try re-installing these?
I often find that special key combos as well as the clipboard get messed up when I'm using VPCs. The easiest way to fix it with with most special key combos is just to flick from the host to the virtual a few times and it usually sorts itself out. Also I often find that if I copy to the clipboard a couple of times then it catches and works, out of habit these days I always whack Ctrl + C two or three times whenever I copy something from the virtual, and this works nine times out of ten.
Clipboard is a bit more complicated to sort out properly than the other key combos, the sure-fire way to solve it is to reboot the host and the virtual but of course that's not always practical. The problem is usually down to problems in the "Clipboard Viewer Chain", this is a part of the clipboard that different apps (eg VPC, RDP, etc) subscribe to so that they can know about all clipboard changes and insert directly on there. Each app in the chain is supposed to pass all info onto the next app in the chain, but sometimes when you close one of the apps in the chain it doesn't take its link out of the chain cleanly. This means that the app before it is now trying to pass the info onto an app that's not running, and the app after never gets the info.
KB949229 The clipboard on the host computer may not function correctly when Virtual PC 2007 or Virtual PC 2004 is running talks about this problem from the opposite end that you're seeing it, but it's still part of the same problem.
If it's an RDP session that's caused the problem you can just use the Task Manager to kill and restart the rdpclip.exe process.
More on it here: The Old New thing: Why has my clipboard stopped working?
I found that the program rdpclip.exe was the culprit. I created a file called restart clipboard.bat on the XP desktop and run it after starting a VPC session.
The file contents are:
taskkill /im rdpclip.exe
start rdpclip.exe