I think most meta users must be familiar with the issue of questions being answered in comments.
Yes. They're referred to as comment–answers. I don't know why people on language sites make such a big deal out of them, as opposed to non-language sites. Maybe SO et al. have other, bigger problems? Or maybe erroneous undownvoteable comment–answers are much more common around here?
Personally, I'm not saying they're not annoying, but considering you can't possibly get rid of them — all of us run short on time sometimes, leaving a quick note to 'get the OP going' — and we have bigger, more objective issues to deal with (Cough) and the fact that there's an easy workaround, I consider them a non-issue.
I remember someone saying I could copy and paste the comment into an answer. Which I tried last week for the first time, but someone downvoted my answer, saying I shouldn't have copied a comment. So did I do something wrong?
You're not really exempt from giving credit where it's due. You should indicate that you quoted the commentator, and the answer isn't really yours.
Furthermore, some people might feel that rep earned this way isn't fair, so making it Community Wiki, although your choice, sounds like a good thing to do.
Is an answer expected to be "fluffed up" and made nice if it's taken from a comment?
That's partially true, yes. Comments can only contain up to 500 characters, while answers can contain up to 30,000.
Comments are, ideally, never used for answering. It's unclear whether hints constitute an answer, but comments should ideally be only used for asking for clarification and providing meta info.
Also, as I said, when you see a comment–answer, it was because the commentator did not feel that their comment was "fluffy" enough to be an answer of its own. It would be pretty weird to see more substantiated comments under a question than answers, don't you think?