Converting a screenshot to .prg in timanthes

Opening and cropping

Open the image, select the screen area (needs to be 320x200) and select image->Crop to Selection.

Converting to indexed colour

Go to the colours window and select ‘Reset to Default Palette’.
This will give you the default c64 palette. (Select either yes or no to the ‘remap’ question
after that, no remapping will be done because the image is not an indexed picture yet anyway)

Double click on the layer. This will bring up the properties for that layer.
Select the ‘Indexed Colour’ checkbox and select the restriction mode
(Bitmap multicolour, in this case).

Your image will now look like this:

Selecting the background colour

Select Layer->Machine specific->C64 Pick background colour.

Click on the black colour and click Ok.

Add a new layer.

Move the layer down so it becomes the background layer.

Select the paint bucket tool. Select your background colour in the colour window
(black, in this case) and click on the image to paint the background layer black:

Cleaning up

All done. You can select the second layer to remove bits of the image that you don’t need,
after which you can export the image as a .prg file: