your process is interesting, but not entirely a good idea...
Here's why. First of all, sure, go ahead and create an os x disk image and format it for DOS. It'll work in dos, HOWEVER, it is NOT an ISO image. ISO9660 images (as I understand it) are intended to be cross platform, etc. the image you just created has only a DOS filesystem, and therefore, while it can be READ on most machines (most machines are willing to read DOS filesystems) it isn't quite the same thing.
also there is no point in renaming the image. Your renaming it (I assume by this you mean changing the extension to iso) has no purpose whatsoever. in fact it may make things not work. Renaming it does not change what kind of image file it is. It's still a Mac OS X disk image with a DOS filesystem. however, toast should be able to burn Mac OS X disk images anyway (I don't have toast, so I don't know...), which is why it worked in any case.
