I think you're on the right track. When you copy something, the program you are copying from puts it on the clipboard in one or more forms. Usually it will be text only, formatted text, and sometimes "picture". By choosing Paste Special, the receiving program can be directed which form to grab and put in the document.

In this case, it sounds like Works is grabbing a picture form of the item on the clipboard, and it is incompatible. I can't speak to why that would have changed in the past few days, or what to do about it.

Sometimes, the error messages themselves are in error. The program can be guessing at what is wrong and become confused itself. Let's say the web browser got set for a different character encoding that Works doesn't understand. The developers might not have accounted for that situation so when it couldn't deal with the clipboard contents, it might only have been able to say it was too large.

Anyway, these are just a couple of somewhat random thoughts. Hopefully, someone else's mind will trigger on a solution.