This appears to be fixed in 8.20, now on its way into raring.  From the
NEWS file:

  cp --no-preserve=mode now no longer preserves the original file's
  permissions but correctly sets mode specified by 0666 & ~umask

** Changed in: coreutils (Ubuntu)
       Status: Confirmed => Fix Released

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https://bugs.launchpad.net/bugs/379233

Title:
  cp preserves mode with --no-preserve=mode

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