Step 3: Negative
I loaded my digital pictures into photoshop. Removed the color information (for a B&W image). Did image->invert for the negative.
The negative can be printed on an inkjet, laser printer, or copy machine. I printed my negative using an inkjet printer with inkjet transparency sheets. I used "high quality black and white" mode (which uses the color inks to make B&W). I did this because the colors are more UV-resistant than the black (in my experience, I make positives for doing UV/foto printed circuit boards that need very high accuracy).
The negative was placed with the ink against the paper. This is the same thing I do for PCBs - it really helps prevent unwanted light leakage.
The paper and negative were placed in a cheap picture frame to keep everything flat and aligned.