Use centimeter. One Unreal Unit is equal to one centimeter. You could also use meters and translate the decimals in your head; I believe setting units to CM causes one grid block to equal one CM, which is crap. Having each block be equal to 100 units I think is generally more useful. Especially when making anything remotely large.
1 UU (unreal unit) = 1 cm so it should be set really. I would use Z up if you are going to be doing Animation but I think the engine now automatically detects z/y up now. In udk and previous unreal engines, it used to be inches but they are all metric now so should convert just fine.
Y>Z conversions are done automatically on import, don't bother with that. Especially since a lot of stuff in Maya doesn't work correctly with an altered orientation anyway.
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You could also use meters and translate the decimals in your head; I believe setting units to CM causes one grid block to equal one CM, which is crap. Having each block be equal to 100 units I think is generally more useful. Especially when making anything remotely large.