Your unpack min should be -1, sRGB should be unchecked, and compression settings should be TC_Normalmap or TC_NormalmapUncommpressed. When importing a normal map if you set the compression setting to TC_Normalmap the previous 2 settings with be set by default.
it looks like the TEXTUREGROUP_ settings that UDK uses for normal maps Changing the TEXTUREGROUP_ to something like TEXTUREGROUP_UI would help but its not recommended for production :) http://udn.epicgames.com/Three/TextureSupportAndSettings.html
The pixilation of your map in UDK is probably caused by the DXT compression that UDK applies to a normal map compressed with the TC_Normalmap setting. You could try TC_NormalmapUncompressed. It will end up smoother with way less artifacts, but this will also cut your texture's resolution in half. An obvious workaround…
I just realised i made a typo. Texturegroup should have been LODGroup :P I can really see any other solution to this apart from playing around with the compression settings. AFAIK this is a good as they get as the lod size for UI is 4k. As you suggested before, you save from doing this step a ton of time, you can change…