>> 0. Run in a terminal: emacs -Q -nw
>> 1. C-s
>> 2.1. either from the MATE Terminal context menu select "Paste"
>> 2.2. or in xterm click the middle mouse button
>>      (both calls the same command)
>> 3. Emacs hangs and typing 'C-g' produces the backtrace:
>
> Crystal ball says this is because of the xterm paste support.  Can you
> try after disabling that extension?

I don't know how to disable it.  Pasting works fine via ‘xterm-paste’ event and
command with the same name.  But hangs when evaluating ‘(xterm--pasted-text)’.

Since the ‘xterm-paste’ command works without problems, I just copied its body
to ‘isearch-xterm-paste’, and everything works fine with this patch: