First tip for making the editor stable is to disable the auto-save feature which you can find out how to do by checking out this tutorial I have put together. It is not 100% complete, but it is better than nothing.
It shouldn't matter where you keep your saves, but if you start having files with same names in different locations you may run into some confusion.
Here is the holy bible of Unreal 3 documentation. Almost everything will apply to the editor we are using give or take some features since our editor is slightly older than what is documented here, but everything is pretty much the same.
There is no issue with having a steam version and an alternate install location specifically for modding, actually this is the only method I would advise of.