SUMMARY
As of some recent update to my system, the option mentioned in the title doesn't work 100% of the time. I haven't found any pattern to the behavior and it fails more often than not. 
My setup was that I use a shortcut to do rectangular region selection, and Spectacle immediately copies the image to the clipboard. After this bug popped up, I now have it so I use the keybind to open Spectacle, and "When launching Spectacle: Take rectangular screenshot" in the options. It still doesn't do a clipboard copy all the time, but at least I can press the copy button manually since the Spectacle window opens.

STEPS TO REPRODUCE
1. Set "After taking a screenshot:" option to "Copy image to clipboard"
2. Do a rectangular region selection either by starting it with Spectacle or assigning it to a shortcut.
3. Try to paste.
4. Repeat variously.

OBSERVED RESULT
The screenshot is sometimes copied, and sometimes not.

EXPECTED RESULT
The screenshot should always be copied.

SOFTWARE/OS VERSIONS
Operating System: Arch Linux 
KDE Plasma Version: 6.5.4
KDE Frameworks Version: 6.21.0
Qt Version: 6.10.1
Kernel Version: 6.14.0-rt3-arch1-5-rt (64-bit)
Graphics Platform: Wayland
Processors: 16 × AMD Ryzen 7 5700G with Radeon Graphics
Memory: 32 GiB of RAM (31.2 GiB usable)
Graphics Processor: AMD Radeon RX 6650 XT


ADDITIONAL INFORMATION
Again, the Copy to clipboard button in the program window works 100% of the time. It's just the copy after screenshot functionality that's broken.