The first appearance of the Skaarj. In the first part of the Rrajigar mines, steel bars lock you in a narrow corridor, then one by one all the lights go out. You hear a menacing growl, and then alarms blare and the action music starts as a Skaarj scout leaps from a hidden alcove to attack. However, there's a way to escape from that area. Charge the Dispersion Pistol and do a Dispersion Jump. You'll miss the great moment, however.
Bluff Eversmoking, a large, fully explorable location with a lot of attention to detail. It also has some of the best subplots.
Multiplayer-wise, DMDeck16, by far the most awesome deathmatch level ever created in the series.
Also DMMorbias, a.k.a. the Colisseum of Destruction. Even with just one weapon, it's mayhem at the maximum level. And a helluvafun.
While only noticed by the technically-minded, the game's software renderer qualifies as awesome. How? It doesn't use nearest-neighbour texture filtering, which every other software renderer of the time used (and which usually looks like crap). Bilinear filtering looks pretty good, but is too demanding if you don't have dedicated hardware for the task (at least on hardware of the era). Unreal takes the third option of using a different kind of algorithm for its texture filtering. According to the programmer who wrote the engine, it uses an ordered dither on the texture coordinates, controlled by the on-screen pixel's location via some simple bitwise operations and a couple of lookup tables. If run at a high-enough screen resolution, the results look almost as good as bilinear filtering, and it's actually not that hard to implement. Heck, you might even decide you like the distinctive look better than classic bilinear filtering.