All of this is perfectly possible in Premiere Elements.
You could create a contact sheet (as you put it) using the Title designer as this supports soem basic graphics. Alternatively create using the imaging software of your choice. Once you have done this place the imafe on VIdeo 1 track.
Place your video clips above this (On tracks 2, 3, 5 and 5)
For each clip (on 2, 3, 4 and 5) you will have to change the size of the image. For example to place a clip in the top left hand corner,
1. Select the clip by clicking on it.
2. From the Windows menu select Effect Controls
3. Under Fixed Effects expand the Motion bar
4. Change the position to 180 x 144
5. Change the scale to 25%
6. Repeat accordingly for the other clips remembering to change the x and y values (thats the 180 x 144 bit).
6. To grow a clip to full size you will have to set some key frames and change the values accordingly at each key frame. Try and work this one out, but if you are having difficulty, post back and we shall talk through the detail.
To make a clip monochrome (or sepia tinted),
1. Open the Effects window (Window > Effects)
2. From Image Control drag the Color Balance (RGB) onto your clip.
3. From the Effect Control window exapnad the Colour Balance bar and play about the the RGB values until you have your desired effect.
COMPAQ something or other with 500Gb Boot Disk, 1Tb external Firewire Disk, 4Gb Memory and a super duper sound card, 19" TFT Monitor etc etc etc
Sony TRV33e : Sony TRV310e : Canon XM2
Sony Vegas Studio editions to v11
Remember, there is always more to learn than there is to teach.