I've seen this behavior a few times over the years on work machines, but I've never seen it on a personal installation. I'm aware of the "Restore to original size" option -- but it's absurd to have to use that feature every time you paste an image.
And this behavior is clearly not by design, because I've only seen it happen a few times in over 10 years of using OneNote.
Updating the video driver didn't help. Any thoughts?