You're running into the limitations of the ISO9660 file system. Do MS's "Joliet" extensions help? They should for the file-depth thing. But you will continue to have problems with the read-only flag. All files on an ISO9660 image are presented as Read-Only, so that's what you get when you copy the files off.

Linux can write an image on a CD-ROM of whatever filesystem you like. I remember stories years ago of ext2 CD-ROMs. At least that way you'd get the permissions correct, but if your problem is Windows oriented, I don't think it can help you.

Wade.