I'm sorry, we're ALL missing something here. I thought you wanted this to be able to convert non-MP3s and we explained how to do that. Now you're still saying you want this "virtual CD". If not only for converting to MP3, then what? There's something you're not telling us. Is it because Finder can create a Burn Folder, but iTunes can't? Well, Finder doesn't have playlists, is the answer to that one.
I think you should go back to the beginning here, and let us know exactly why you want this thing, then if there is an existing way to achieve the same thing in iTunes (like converting to MP3), we can tell you.
Bottom line, a playlist IS a virtual CD, but if that's not enough, then please expand for us. Otherwise we cannot help much.