I believe that only works between color profiles and not different color modes.

"However, PS never worked this way before"

Are you sure? I tested on CS3 and there is no warning when past between Modes.

At some point I remember getting warning dialogs pasting RGB to Grayscale... But I can't remember what version it changed.

I think this is excellent fodder for an enhancement request.  Seems to me if any conversion is to be done it ought to warn.

-Noel

It could probably even be legitimately called a bug...

By the way, dragging an image from Finder/Explorer/Bridge/etc. to an image in Photoshop is probably somewhat like a "File Open" operation as well as a paste.  But I assume all the boxes are checked (that's the way I keep 'em as well).

-Noel

The dialog has two functions in this case - a warning, and a choice.

The dialog for a color mode conversion could just be a warning without the choice.  The preference does mention being given the choice, but I think the key thing here is the warning.  It's not like we don't have a way to avoid the warning (by unchecking the preference).  The wording could be changed slightly in the Color Settings description to handle the possibility that you won't be asked - it's kind of silly to think the warning could be suppressed because it's not possible to ask the user to maintain the color numbers.

An example rewording:

Profile Mismatches - Ask When Pasting:  When enabled, you will be notified whenever color profile mismatches occur as colors are imported into a document (via pasting, drag-and-drop, etc.0), and (where appropriate) given the option to override the policy's default mismatch behavior.

-Noel