I tried it on my windows machine and it seems working fine for me. Also the size of the image on screen is defined by the number of pixels in the image and not by the image dimensions you see on the screen. To confirm this try pasting the image from Elements into some other software such as paint (or some other software from which you can save the image) , save it as a jpeg and then open it back in elements. Then check the "Image Resize" dialog box for this image. The pixel dimensions for this image would be same as the previous image although height/width and resolution might be different. It will not matter since height/width and resolution only comes in picture when you print.
I don't have PSE8 to try it on , but I thing that if you try the same workflow with the same image with PSE8 , the result will be same.
If it works in windows you are fortunate, because it certainly does not work on mac version.
Note that I have done this thousands of times in PE8. I'm guessing it is a common use. I use the functionality for combining many images on the same printable page, such as images of my wife's students. YES, I can resize it when I paste the image into MSWord, but it is an extra hassle unnecessary in PE8, and broken in PE11.
Note also that using the rectangular marquee to select a portion of the image (say 1" x 1") and copy rsults in pasted image of about 5" x 5".
In the "resize image" user is able to specify dimensions of the picture in either inches or pixels. I choose inches. In PE11 the image shows new size, and if saved, reopening shows correct size. The problem appears to be when PE11 "copies" the image.