It's certainly there in TB 52.2.1/W7 (see picture), in both the plain text and html message composer. To test if it's an add-on or broken layout causing this, among other factors, run in safe mode (Help/Restart with Add-ons Disabled) and see if there's any change to the menus.

That picture seems to show a Windows application. It was helpful, in that the keyboard equivalent actually works in El Capitan TB 52.2.1, but there is no "Paste as Quotation" in the drop down menu. If it's in an add-on that I don't have, why does the keyboard equivalent do the job correctly. If it isn't, why doesn't it show up in the menu of a newly upgraded Thunderbird, upgraded from a version in which the menu item was there?

If the keyboard shortcut works, it suggests it's not an add-on disabling the feature, but possibly a broken layout that causes the menu to not display correctly. Running in safe mode will test that, since it applies the default layout for menus and toolbars etc. If the menu displays correctly in safe mode, then you should start in safe mode again, check 'Reset toolbars and controls' and click 'Make changes and restart'.

There's no change in Safe Mode. My only Add-ons were Lightning calender extension and Shockwave flash plugin (the latter set to "never activate".

I don't have a mac to test whether the menu item has been removed in 52; the menus are not identical across operating systems. But in cases like this where the standard diagnostics don't reveal the source of the problem, I'd be inclined to first perform an uninstall and re-install of the full program (not upgrade from a previous version). This doesn't affect the profile folder where your data are stored. Second, I would create a new profile with Profile Manager, set up an account, and see if the menus display properly. If they do, data can be transferred from the old profile to the new one.

On a Mac there's no special uninstall procedure. You just trash the application. So I replaced the application with a new download. No difference. No difference on any of the four accounts I use. I guess it's just the way 52.2.1 is.

P:erhaps file a bug. https://bugzilla.mozilla.org/