If you can accept a textarea instead of a contenteditable div, you can do something like this:
window.onload = function () {
    var div = document.getElementById('div');
    if (div.attachEvent) {
        div.attachEvent('onselectstart', function (e) {
            e.returnValue = false;
            return false;
        });
        div.attachEvent('onpaste', function (e) {
            e.returnValue = false;
            return false;
        });
    } else {
        div.addEventListener('paste', function (e) {
            e.preventDefault();
        });
        div.addEventListener('select', function (e) {
            var start = this.selectionStart,
                end = this.selectionEnd;
            if (this.selectionDirection === 'forward') {
                this.setSelectionRange(end, end);
            } else {
                this.setSelectionRange(start, start);
            }
        });
    }
};
HTML:
<form>
    <textarea id="div"></textarea>
</form>
A live demo at jsFiddle.
Some observations on the code:
- In many browsers onselectis fired only forinputortextareaelements within aform. That is a reason for the different HTML from yours.
- IE9 - 10 don't support selectionDirection, that's why IE's legacy event handling model is used also for these browsers.
- If not IE, you still can replace a bunch of text by selecting it with mouse and hitting a key without releasing the mouse button. I suppose this could be prevented by detecting if the mouse button is down, and in that case preventing keyboard actions. This would be your homework ; ).
- The code for IE works with contenteditable divs too.
EDIT
Looks like I've done your "homework" too.