Well an .iso image is basically an image of a data CD. Hence you can make an .iso image of any disk that you would like (barring the existence of some form of copy protection mechanisms or damage to the disk). Now with the assistance of a application a disk can be converted to an .iso so that it can be moved around more easily (i.e. stored on a hard drive as a single file, or downloaded via ftp or http and so on), and then at a later time with the use of an application be expanded onto another CD, or possibly a hard drive if you had a desire to do so.
As for the system not booting to the CD, one of the first things that I would try would be to get your hands on another bootable CD, and make an effort to boot off of it. If this works it will tell us that the machine will boot off a bootable CD and we should focus on the mondo rescue CD that you have, if not it tells us we should focus on the system.
Playing the odds it is more likely that the disk is the problem. I would suggest that you place this disk into a running system, go to the command line, CD to the root directory of the disk and perform an ‘ls –l’. If you were to post the results of that listing, I am sure it might go a long ways towards helping someone identify the problem that you are having.