UltraISO has a "Optimise" feature, that can sometimes make the ISO image smaller.
Not sure if this is what you are refering to.
When you install any progarm, it will normally end up bigger than the size of the installer, this is becuase the contents are compressed, I think Nero BackItUp will compress the files to be backed up if you tell it to, and is a very good piece of recovery software, or you could just RAR it and split it into chunk.
Can you try and be more specific? Do you wish to back up the WHOLE hard drive and everything on it, or just some files on it?