Actually you have two separate issues here:
Assuming your using 2000, XP, Vista, or 7, Reformat your drive to NTFS. If using ME or earlier, download the NTFS support package from MSDN, using the search function; install it and then reformat. If you're using Linux or a sub-X system with Wine or Vme, format it to ext3 or ext4. That will remove any size issue you may run into.
As for burning ISO/IMG files to flash, that's a more advanced issue. For Windows you'll need a pass-through driver api kit. It creates a layer that sits between the drive controller and the OS, much the way AnyDVD works. Try some of the more specialised sites such as Overclockers or Drivebusters, or other sites that specialize in this. You can also try some of the more, um, questionable locals as well, just have good virus checkers.
As an alternative, you could purchase the Microsoft Development Kit, or a competitor's suite. Regardless of how you go, you'll need to create the layer yourself.
If on an X system, simply change the drive mount line in the command line, for booting. adding a \asV \CD8880x to the boot mount command will change the drive's appearance to the OS to a CD-R. I'm not sure what he command is for changing it to a DVD or HD/BD drive, but try looking at some of the linux forums for further help
The programming involved to make such functions work on every conceivable configuration are sure to bar such an addition to the software. AnyDVD took a LONG time to get to function correctly, and it takes almost 6 months to change to the new OSs correctly and stably. It will just never happen directly.