I kept reading that this couldn't be done, then I stumbled upon a post somewhere where a kid said he did it with Alcohol, I tried it and it works on my modded Xbox.
Here's how:
1. insert the xbox backup disk into PC's dvd drive
2. start "120"
3. click image making wizard
4. under "session" - click "01". Then click "next"
5. under "image location" - choose location. Then click "next"
6. locate "file.mdf" and change it to "file.ISO"
7. Burn as normal ISO, I use Nero @ lowest speed.
Cheers,
Craig