Middle mouse has worked for me since, um, 1990 or so under Xfree86 and SunOS before that. It's one of the significant advantages of Linux over Windows etc. (ctrl-C means "send the current process a SIGINT"; this microsoft-emulation is for the birds..)
I just noticed a problem in FC10; I'd left a gnome-terminal running for several days and copy/paste had stopped working reliably - could sometimes paste, but not copy. Starting a new instance seems OK. I think I'd seen that on FC9 too - after using a window for some time, it would screw up and then I'd have to kill it and start a new one. (I had suddenly panicked and thought someone had deliberately broken it, or made it optional or something stupid)
Seriously, middle-mouse paste being broken is a major usability issue.