Yes. But how you go about doing it depends on what version of Disk Copy you use. The version that comes with 10.1, go to the Image menu and down to "New". It'll ask you what you want to call it and where to put it, how big, etc., then it will auto-mount. Now just copy what you want to that new image/folder, how you want it layed out, and you're all set. Older version (read Classic) are slightly different, in the image menu - Create Image from Folder. The only difference is, it creates the image for you, no need to copy and guess at image/folder sizes. Hope that answers your question.
You can use Disk Copy under OS X 10.1 to make a .DMG file, which is essentially the same as an .IMG file. If you want an .IMG file, I think you'll have to use OS 9's Disk Copy to do that.
Open Disk Copy, and select "New Blank Image" from the "Image" menu in the menubar. Select an appropriate size, like 650MB for a CD or however large you need it. After you hit OK, the image should mount, and you should have two files on your desktop (er, one file and one volume, which is the mounted image file -- like a disk). Drag 'n drop your files onto the "mounted volume" and it should copy them over. Un-mount the volume you made by highlighting it and hitting Command-E (under OS X) or Command-Y (under OS 9) or simply drag it to the trash. It will unmount. You will now be left with either a .DMG file (OS X) or an .IMG file (OS 9) that contains your files.
To check it, double-click the .DMG or .IMG file and it should "mount" again, intact, with the files you copied over there.
Well, just in case it helps someone, I have had some luck with (shrinkwrap) .img files that boot in OS 9 but fail for a multitude of reasons in OS 10.1.
1. Mount the image in OS 9.
2. Open DiskCopy in OS 9 and create a new image from the mounted disk icon.
3. Save this image somewhere where it can be accessed by OS X.
4. Boot under OS X and mount the new image! (Discard the original image when the new one is confirmed to work.)
It has solved many problems for me in the past! Hope this helps.
Permit me to suggest an amazingly simple freeware solution that I have employed.
FreeDMG can be found at ---> http://www.macupdate.com/info.php/id/15740
Simply copy the subject files to an empty older (with a logical name). Drag and drop onto the target window of FreeDMG Its a no-brainer!