The second key feature is copy and paste. While not the biggest deal for many customers, it is an omission in Windows Phone 7 that early adopters and reporters have given Microsoft plenty of grief about. Adding this feature should end that and put another tick in the feature check box for those comparing Windows Phone 7 side by side with iPhone and Android. (Now it just needs full multitasking, visual voicemail and a couple of other things.)

Officially, Microsoft is saying only that the update is due “in early 2011″ and will be the first of many regular updates to the operating system.

So how is Windows Phone 7 selling? It’s a little early to say definitively. There have been a couple of reports suggesting slow sales, but they are also based on very small data sets. For example, British phone retailer Mobilesplease says it is seeing Windows Phone 7 being outsold 15 to 1 by Android and 3 to 1 by Symbian-based devices. However, those numbers are based on sales data covering just a couple thousand phone sales.

Enthusiast site WMPoweruser tried to suss things out a bit by measuring how many Facebook activations there have been for Windows Phone 7 and came up with a figure of around 135,000. (Facebook support is built in to the operating system, but not all users choose to link their Facebook account to the phone). There’s also the fact that both T-Mobile and AT&T are offering “buy one, get one free” promotions on Windows Phone 7 devices. That could be a bad sign, but this is the holidays and carriers tend to like getting two users in a household and are willing to put some marketing money behind those efforts.

An AT&T spokesman, meanwhile, told Mobilized that the company has been pleased with Windows Phone 7 sales thus far, though neither he nor Microsoft would go into any specifics.

So what does all this mean? It’s hard to say. It’s clearly not a home run, with the phones selling so fast that stores can’t keep them in stock. At the same time, it is probably not the Kin-scale flop that some predicted either. (I know that doesn’t narrow things down too much. If anyone out there has more data, I’m all ears.)

Also of note, as of Wednesday there is one more Windows Phone 7 device to consider during these holidays, though you will have to go online or to one of a handful of Microsoft retail stores to find one. Dell is ready with its previously shown Venue Pro device. The rugged phone, which runs on T-Mobile’s network and features a vertical slide-out keyboard, will come in 8GB and 16GB versions.

The Venue Pro (seen above) is getting the most aggressive pricing of the early Windows Phones, starting at just $99 for the 8GB version when bought along with a new two-year contract. Those upgrading will have to pay $199, while it will sell for $449 without a contract at all. The 16GB version is priced $50 higher in all cases.

According to new data released this week by Gartner, Apple shipped some 7.04 million iPhones in the third quarter–up from just 4.72 million phones in the same period a year ago–for a 17.1 percent share of the market (see table below; click to enlarge).

That’s a 49.2 percent year-over-year increase in sales and it puts Apple (AAPL) in spitting distance of Research in Motion (RIMM), which also posted close to a 50 percent year-over-year gain to claim 21 percent of smartphone sales during the period.

With 39 percent of smartphone sales, Nokia (NOK) was the top seller during the period, and it’s clearly not ceding its spot any time soon. But RIM might, given the small gap between its market share and Apple’s.

In any case, RIM clearly has a fight on its hands as we head in the holidays, especially if Apple brings an 8GB iPhone 3GS to market in the next few weeks.

UPDATE: According to Apple’s last earnings announcement, the company said it shipped 7.4 million iPhones during the quarter. Why there’s a discrepancy between the company’s numbers and Gartner’s isn’t clear.

“We did a long-term supply agreement with Toshiba,” Cook explained. “As a part of that, as part of the terms and conditions, we paid them $500 million as a pre-pay earlier in the quarter. You know, we view Flash as a very key component for us because as you know we use it in so much on so many of our products and also we are a reasonable percentage of the user of Flash on a worldwide basis.”

Indeed, Apple (AAPL) sells millions of NAND flash-enabled devices each year, so many that its needs often constrain supply for the entire market. In 2005, the company arranged to purchase up to 40 percent of Samsung Electronics’ holiday NAND output for use in it iPods. In July of last year Apple bought 50 million 8Gb-equivalent NAND flash chips from Samsung, forcing the company to reduce its supply to other customers.

Then, this past April, Apple ordered 100 million 8Gb–or one-gigabyte (1GB)–chips from Samsung, once again causing flash supplies to tighten. Now we have this $500 million prepayment, which, according to sources, will keep Apple in NAND for about three months.

Great news for Toshiba, which has been suffering mounting losses in the midst of tougher competition, and for the NAND market as well. As Tim Cook said yesterday, “The NAND market has now begun to stabilize and we expect it to move towards a supply/demand balance.”

Now comes word that the company’s appetite has been renewed–and doubled. Industry sources tell DigiTimes that Apple has placed an order for 100 million 8Gb (1 gigabyte) chips from Samsung, an order so large it is reportedly causing a supply shortage. If correct, the DigiTimes report could lend a bit of credence to rumors of a low-end iPhone. Unless, of course, Apple plans to use them for something else entirely, (a single, massive 100 million gigabyte iPhone?)–also a distinct possibility.

Either way, contract prices for flash memory are likely to rise to unpleasant levels in the near future.