An image file is everything needed to create an autoplaying, standards compliant DVD-Rom. The "video_ts" folder is only one part of that. There's also the (usually empty) "Audio_ts" folder, and some other stuff that says how the disk is to be authored and read... I'm not really sure off the top of my head what that stuff is but I know it's there and you need it, too. I learned some about it when I was making a slipstream disk of SP2; you need the files, but you need other stuff too that says how they're to be read.
Works fine for me. Better even, because it was setting the booktype on my burns to DVD-rom automatically before I figured out to make Decrypter do that. Not to knock Decrypter, though. I know it's awesome, and I use it whenever it is convenient to do so.
I'm saying if the source disk contains less than 4,700,000,000 bytes, then rip in ISO-read mode, take the disk out, put a blank in, and use decrypter (in ISO write mode) to burn the resultant .iso file. Actually, decrypter creates two files ... the image file (.iso) and another little one (.mds) ... and I select the .mds file to burn the .iso. But that's just me.
If the file is bigger than what fits on a single-layer blank dvd; rip in "file mode". Then process the video in whichever program you have... Shrink, I guess. Make shrink create an .iso file and decrypter should burn it. Maybe it wants the ".mds" file too? Maybe that's why you need to specify burning with Decrypter. So it has that info too. I don't know, but if it works, than why wonder why it doesn't work not doing it that way?