Here you go scott & osho this is the extract from the wiki
http://wiki.jrmediacenter.com/index.php/DVD_Library_in_Media_CenterISO file It is slightly more work to playback ISO files in MC.
Download and install Virtual clone Drive software - it is free.
Enable shell integration feature of virtual clone drive.
Open the folder that contains the .iso file in Windows Explorer. Make sure that when you double-click on .iso file it is mounted on your virtual drive. If shell integration is enabled in virtual clone drive then the file should mount on virtual drive upon double clicking it in windows explorer.
Drag and drop the .iso file or the folder that contains .iso files to MC window. Or, right click on the folder containing .iso file and click on Media Center -> Import (assuming that the shell integration feature of MC is enabled). MC will import all the .iso files in its library.
These .iso files are visible under Documents in MC. Double click on the .iso file inside MC. This should mount the file on the virtual drive. You can set-up MC to start playing DVD automatically in full-screen mode (Display View) when DVD is inserted. If you have setup MC this way, DVD should also start playing in full-screen mode when you double click the .iso file inside MC.
The .iso files can also show up under Video in Theater View. To do this, change the Video view scheme to include both Video and Documents data type. In Standard View, there are three Audio, Images and Video buttons on the left. Right click on Video button and select "Edit View Scheme". This will pop up a dialog box where you can select Media Type under Step 4 (at the bottom of the window). By default it would have Media Type: Video. Click on Video there and select "Edit (with wizard)". This would show a Media Type window. In that select both Data and Video and click OK. Now, the View Scheme window should show Media Type: Data, Video. Click OK. Now, when you click on Video in theater view you should see all documents in it too. If you have other documents than .iso files in your documents tree (such as .txt etc. files) then you should get rid of them if you don't want them to be seen in theater view.
Since recent MC12 versions (12.0.251 and later), it is now possible to assign cover art to .ISO files as well. In order to do this, edit the "Media Type" tag of the .ISO file to Video. Now, assign cover art to .ISO file as you would normally do. Now, change the "Media Type" tag of the .ISO File to Data. You will have cover art assigned to the .ISO file now and you should be able to play the .ISO file as well.