Don't have a mac in front of me, but have you ruled out the possibility that the function is built into Disk Utility?
Disk Utility, might be something of a "restore" function.
Here are other methods/resources:
I use Toast for stuff like that - i also don't have mine right in front of me, so I'm not sure if it would perform that specific function. Toast is not freeware, but it's a workhorse - I use it all the time.
Like Howard said, under Applications/Utilities there is an application Disk Utility. You can import an ISO and output a DMG -- or just mount an ISO directly.