This is going to be difficult to do well.
1. Tap, hold and drag would work to select text, but this gesture is already used to finely position the cursor within editable text fields. Maybe a double tap, hold and drag would work for selecting text, but its scope of action would have to be expanded to let it function on non-editable text, as on a Web page.
Alternatively, if you could limit selections to editable text (i.e,. where the keyboard is displayed), you could add a key that would make the single tap, hold and drag select text rather than move the cursor.
2. The next step is to indicate whether you want to cut or copy the highlighted text. A simple pop-up menu could work here. Tap and hold in the selection to display a menu with three options, cut, copy, and cancel (to deselect).
3. The next step, indicating where to paste, is relatively easy, since it's no different than editing existing text now.
4. The last step, pasting the text, is probably the most challenging. It's easy to position the insertion point using the magnifying glass, but then you'd need another gesture to actually initiate the paste operation.
For this, it might be best to add a "paste" key to the keyboard. It would be highlighted when there was text on the clipboard and dimmed otherwise.