Doing Edit - Paste Into with a selection present causes the creation of a new layer with the selection creating a layer mask to allow the data pasted to be visible only in the previously selected area. You can then move it around and merge it into the layer below as you desire.
That's the way it's designed to work.
The "Into" part of "Paste Into" refers to pasting "into the selection", which is what you get with the process noted above, not "into a layer".
-Noel
