Xcode Clipboard: Copy & Paste stuck
Also read in the Apple forums that closing the simulator while working fixes this issue. So if it happens to me I close the simulator and copy-paste works fine from that point forwards.
Haven't tried it yet but I have feeling that Eva's answer is correct in that the simulator is trying to sync your pasteboard.
** Edit **
Can confirm that Eva's answer works and I no longer have this issue when I turn of automatic syncing on the simulator