It is really this simple:
C++
UImage* image = ... ;
UPaperSprite* sprite = ... ;
image->SetBrushFromAtlasInterface(sprite);
This works both in Unreal 4 and Unreal 5. The reason this works is because UPaperSprite
implements the ISlateTextureAtlasInterface
interface.
Hopefully this will stop someone else from searching for this function for 1+ hours like me.