Sometimes copy/paste functionality stops working between client and server over remote desktop. One way to fix this is to log off and on the remote machine. This can be a pain in the a** if you have a lot of windows and applications open.
Instead, goto Windows Task Manager (Shift + Ctrl + Esc) and kill the rdpclip.exe process. Then start it up again (Start -> Run -> rdpclip.exe).
Voila – copy / paste between the server and local machine should work like a charm again!
This applies for Windows 2003, Windows 2008 , Windows 2008 R2.