An attempt to troubleshoot issues with the original package-
⚪ Fix Proper Path Reference
The path reference doesn't work exactly when the file name or the directory has a space in their name. In the original package, the directory and file name doesn't use spaces in their name.
Installation is not recommended at this moment. But the process is -
Through Package Control:
Ctrl+Shift+P -> Package Control: Add Repository -> https://github.com/anyfactor/imagepaste
Then:
Ctrl+Shift+P -> Package Control: Install Package -> imagepaste || Find the one with the anyfactor one.
More info here: Usage - Package Control
Make this package more like this VSCode plugin: Paste Image