Have a look at
Alcohol 120%
Install it, and then select Image Making Wizard - this will guide you through making an image - you can select what filetype you want. I recommend you use the default mds format, although you can select ISO if you wish.
Then goto the options and change the virtual drive options to suit your needs - to mount the image onto the virtual drive, right click on the Alcohol icon in the bottom right hand corner of your screen and then continue from there.