I was messing around with Power ISO the other day. I wanted to create a full disc image that contained just a handfull of small files. I copied and pasted the same files over and over in various foders. I did this until I had 4GB. When I used Power ISO to compile the files into an ISO image, the result was a very small ISO file (~40MB).
Finleyville, perhaps you could do something like this since Power ISO did not physically make multiple copies of the same file.