Disk Utility can do it. Just pop the disk in, the go to File -> New -> Disk Image from <labelofdisk>. Select CD/DVD Master as the type and No Encryption and a file with a .cdr extension appears. This is your disk image (they don't call it ISO because DVDs don't use ISO9660 file system).
Apples hdiutil seems (and has been said) to not be able to create bootable disks. D'uh!
Perhaps mkisofs with the -udf option will work for you. I've only done CD images. I used mkisofs that came with ffmpegX so I made an alias to that instead. Surely it is downloadable by it self.
alias mkisofs "/Applications/3rdParty/Tools\ Video/ffmpegX/ffmpegX.app/Contents/Resources/mkisofs"
Then did this.
mkisofs -r -o bsd40b.iso -b 4.0/i386/cdrom40.fs -c boot_catalog -l -v /Users/dreely/Parallels/OpenBSD/OpenBSD
-r keeps lowercase to lowercase.
-o bsd40b.iso is the end result file that is bootable and burnable.
-b 4.0/i386/cdrom40.fs is the file that gets boot when booting the cd.
-c boot_catalog adds a boot catalog and is required for a bootable cd.
-l allows for 31 character file names.
-v /Users/dreely/Parallels/OpenBSD/OpenBSD is where my content is.