I was able to get a hold of an unofficial Beta Release for Thunderbird 6 earlier today. I had no issues pasting via right-click into the link field on the link tab when inserting an image. So it appears this was a glitch within Thunderbird 5.0 only. As a reminder Thunderbird 6.0 will be released on August 16th.
1 Comment on Update: Inserting Links on to Images Issue Thunderbird 5
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TY, most helpful as the failure to use links with existing email text was inexplicable and frustrating. Plus we only have to wait three weeks for the next version which presumably will have fixed this glitch. Life is good.