Use the path given in the "Extract UBCD ISO" dialog
(Select the UBCD ISO file (CD Image):)
as path for the "Create UBCD ISO" dialog.
It makes sense to me that when you extract and modify UBCD, you want to remaster the iso from the path to which you extracted the iso.
If no extracting is done before remastering, you don't have to use it for the remastering part of course.