There's an icon on the toolbar of the preview window, one that when you click it, it asks you if you want to save as JPEG or PNG (PNG is preferred if you're going to reuse that pic on the video). Hover over the icons and you will find which one it is.
Thank you for your help with the question about creating a JPEG from a video frame. I hope you can help me with a follow-up question. I found the icon and saved the JPEG, but the file size is quite small (21kb). The PNG option increases the file size to about 89kb. Is there any way to capture a larger file that might work for a publication? With file sizes like these, I would be limited to the web and even so can barely manipulate such a tiny file to do anything at all. (I'm using the "save snapshot to file" icon.)
Musicvid's suggestion about setting preview to Best/Full might help you out (if your preview was set to Auto or Half, etc). Also, make sure your project properties are set to match the resolution of your video files. If you have hi-def video but you are editing in a standard def project, you will only get a standard def snapshot.
Keep in mind that video frames are generally much lower resolution than even the lowest end still photos. A frame of standard definition DV video is the equivalent of only about 0.35 to 0.4 megapixels (depending on NTSC or PAL video format). Even a "full HD" 1920x1080 frame from a modern AVCHD camera is only about 2 megapixels.
This is out of necessity, of course, because writing 25 or 30 "pictures" per second, every second, would quickly fill the card or tape (if you could even write them fast enough to keep up).