An ISO is like a big shell that houses VTS files. Everything is processed in a nice and neat package ready to burn. Whereas VTS files are unprocessed and you have many little packages that you can manipulate later.
How do I manipulate the "packages"??? I guess that leads up to my second question. When I am stripping out files I do not want how do I know a preview from a short cartoon????
Before an iso can be created, DVD files first must be written.
Here is a link to a thread at CDF that covers this thourghly. The iso vs dvd files, starts at post #21. http://club.cdfreaks.com/showthread.php?t=157127