I think the title of this extension is a bit misleading, since it doesn't actually paste inline with text. However, it does is allow you to 'paste' an attachment directly to a task, without having to separately upload the image. It will paste whatever image you have on your clipboard, so you just copy the image or screenshot, click in the comments section of the task and paste as normal.
It only works in the comments section (tasks and subtasks), not in the description. And, weirdly, I've just discovered that it won't work in My Tasks, only in individual projects. You might want to try that yourself to confirm but I've tried in several tasks with various images and it won't work in My Tasks.
Hope that helps.