Create DMG from flash drive?

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I have a flash drive with the contents of a Leopard installer. I need to turn it into a DMG. I was able to accomplish that, but the resulting DMG is the size of the flash drive, not just of the contents. Can I resize it to get rid of empty/unused space? Or how do I go about creating an image with only the contents?
 
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For installing Leopard? Go with the retail install DVD.
 

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