^ I did the exact same thing on my laptop and nearly all problems I've ever had with Vista were gone completely. No more having to give admin privilges to all the programs you work with, nor run anything as admin. If you don't do either, NL will not be able to save anything - screenshots, track files, whatever. Worst, it will make it look like it's working just fine while not actually producing any files.
Regarding security, Windows XP had no UAC and ran just fine. There shouldn't be any problems on vista either unless you're DLing in the wrong places or getting attacked by someone. However, I did hear that other Windows components (such as windows installer) will act up and stop working properly because the computer is "insecure" but I have never had to deal with such instances.
I should mention, turning off UAC will also streamline the most basic tasks. Something as simple as renaming a file will always trigger 2-3 windows that you have to OK to in order to rename a file. Turning off UAC gets rid of that completely.
Back to the OP's issue, I have no clue what said compatibility files folder is. NL places all screenshots in C:\Program Files\Nolimits Coasters\Screenshots regardless of which windows OS it's running on. Maybe no screenshots were ever taken in the first place, or maybe you were simply looking in the wrong folder.
It is also strongly advised to convert your screenshots from the .bmp file format, which results in very large file sizes. .jpg is the best format to convert to, but if you can't get any programs to save to it, then you can use .png as well. Yes, Microsoft Paint can save to .jpg, but the quality is horrible and you're better off using .png if you have to use paint to convert the screenshots. Resizing them is also advisable unless you're already running NL at a very low resolution. (such as 640x480 or 800x600)