"I looked at Shrink and I don't see an option for decoding into an ISO"
In my signature, you'll find a link to a tutorial on how to use Decrypter and Shrink together. Shrink creates and ISO that you may then burn with Decrypter (or Nero if you really want to stick with it). It's easy, it's fast, it's safe.
Decrypter burns are of better quality than Nero ones, at least on my drive. Many users report the same, that Decrypter is one of the very best burning tools.
"also will a ISO DVD have full menu functionalities?"
ISO has nothing to do with it, you get the exact same DVD contents either way. But the burning process will be cleaner with ISO because only one big file is managed at the burning stage.
Please read the ISO FAQ on CDFreaks http://www.cdfreaks.com/article/21.