If I Ctrl+V an image into a post it show fine until I commit it, it refuses to post telling me this:

I have to save my image as a file and load it from the file picker menu for it to work.

I'm in windows/chrome.

Makes sense, because the rich text editor does some magic in the background to send the server a plain text field when you submit. Pasting image data into the editor spoils its magic. The button actually uploads the image to the server and adds a link to it, that's how it can work. The modern web is a series of kludges like that, on top of a much simpler system.

If an image is converted to text before the post, then:  should show up

lol, it didn't show up but it posted, which means that at least the limit is correct.

Assuming each pixel is converted as RGBA, and the text limit is 20480, then the maximum amount of pixels I can have in a ctrl+v image is 5120. Which is approximately the amount of pixels in an image 71 x 71 pixels image (minus anything I type in the post).

In the post above I pasted this: (48x44). So it worked, I could post, but funny enough the image didn't come through

Sure, but the problem is data formats. The error message is misleading. I'm not even sure how the system actually works on the inside.