There is a major technical distinction you must understand.
Disc-Based Games (Blu-ray): These convert easily to ISO. The PKG is essentially a patch or a ripped version of the disc. With an IRD file, you can rebuild a perfect 1:1 copy of the retail disc. how to convert pkg to iso
Digital-Only Games (PSN Classics/Minis): These games were never intended to be read from a disc. Converting them to ISO works differently. There is a major technical distinction you must understand
This process uses free Windows tools. You will need PKG Extractor and PS3 ISO Rebuilder (or PS3 Disc Image Tool). This process uses free Windows tools
After the process, you will have a .iso file. Before burning it to a disc or mounting it, verify its integrity. Mount the ISO (double-click it). Does it show a standard folder structure? Can you run the installer from the mounted disc? If the original PKG contained a self-extracting script with dependencies on specific absolute paths (e.g., /System/Library/Extensions), the ISO will fail because the paths are now relative to the disc root. This is the fundamental limitation of the conversion: an ISO cannot mimic an installer script's ability to write to protected system directories.
After extraction, look for a folder called USRDIR. This contains the game's assets. Inside USRDIR, you should also find an EBOOT.BIN (the encrypted executable). A valid PS3 disc structure should look like:
PS3_GAME/
├── PS3_DISC.SFB
├── PS3_GAME/
│ ├── LICDIR/
│ ├── TROPDIR/
│ ├── USRDIR/
│ │ ├── EBOOT.BIN
│ │ └── (game data)
│ └── PARAM.SFO
If your extracted files lack PS3_DISC.SFB and the proper folder hierarchy, you cannot create a working ISO.