Create a folder with the contents you want on your ISO.
Open Disk Utility and use the New Image from Folder menu item to create an image. Ensure it is uncompressed and use the CD/DVD master option.
In my experience this creates HFS+ masters which are no good in Windows.
Open the Terminal
Assuming your new image is called ~/Desktop/Master.cdr (the file is on your desktop and called Master.cdr) type:
cd ~/Desktop hdiutil makehybrid -iso -joliet -o Master.iso Master.cdr
This will create an ISO/Joliet .iso file.
A friend of mine had this problem with her camera storage thingy. If you're a MacOSX user, you might want to read up on the symptoms and solution on her blog.
Extra thanks go to Heidi for this.
