There is a few things concerning screenshots.
The size of the image must be 256x256.
If you want it to be saved along with the level you must import it to
the texture package "MyLevel".
To create a screenshot of your level you should enter it as a spectator.
(Preferbly remove the info hud).
When you find what you want a screenshot of, press "F9".
The file is stored under the "...UT\System\" folder, "shotXXXX.bmp".
Open this file in any picture editor, resize and cut it to 256x256.
This image you then import from the texture browser.
(UED2 is fully capable of importing bmp pictures so don't worry).
Under "Package" you type "MyLevel".
Let the "Group" be "Base", and type "Screenshot" in "Name".
Press "Ok".
This texture will now be saved along with your level.