You should select the sub-channel data and abort on read error boxes on reading

You should select Don't repair sub-channel data, RAW-DAO write mode and Always close last session on writing.

Incidentally, the .img file produced can be patched with standard patchers (should you need to do this) and where the patcher requires the file to be called *.BIN, you simply rename it, patch and then rename it back to *.IMG. (So I've dicovered thanks to Chrono on the PSX Forum and tried just once.)