The reason that you do not see a link/paper clip on the test instance when you create a defect off of a test step is because the defect is linked to the step not the test instance.
The entity that the defect is linked to is stored in the LINK table in the project. When you create a defect from a test instance step then look in the link table you will find that the link is to the step in the STEP table not the TESTCYCL table where the test instances are stored. You could manually go and add a link to the test instance in the test instance properties if needed. If you add the link manually then the link/paperclip will show up.