#1 -- Issue 1 -- http://www.modacity.net/forums/showthread.php?t=9205
#2 -- Not recommended for the Unreal Tournament 2004 editor... but in the UnrealEngine3 editor (UT3, Gears, etc) it's not only possible, it's recommended. The problem with UT2004 is that Static Meshes REALLY don't light well.
If you want to map using all Static Meshes... best to pick up a copy of UT3... it's only like 20$ on Steam.
Oh -- and about the textures thing... you're looking at an Unreal Tournament 1 tutorial (UnrealEd = Unreal... UnrealEd 2.0 = UT... UnrealEd 3.0 = UT2003/4... UnrealEditor for {Insert UnrealEngine3 powered game here} = {Insert UnrealEngine3 powered game here})
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