It is not really possible to create an image of a modern PC on one CD,
because a CD is simply too small, and XP+prgrams are too big. What you
probably have is a bootable CD that works in conjunction with an image of
the original C:\ partition that is "hidden" on your hard drive. I found one
of these images on a Dell the other day, and undersand that they are fairly
common. Any software that can access a disk at a lower level than windows
can probably see the hidden partition. This would include Norton GHOST ruin
form a floppy, Acronis TrueImage run from a bootable CD, Partition Magic run
in windows, etc.
As for making an image, that is a very good idea. I have done this for
years and these images have saved me from several disasters, mostly bad
installs, of which about half were Microsoft Windows Updates. I use both
GHOST and TrueImage. GHOST is ultimately more powerful, but TrueImage is
easier to use and has better support for external USB and firewire disks.
My typical disk image is 2.5 Gig, and that is using compression. Both
programs allow the user to specify that the image be broken into pieces,
such as 650 Meg, for ventual writing to set of CDs. I avoid direct CD
writing, since it is much slower than disk-to-disk writing, and less
reliable. Sometimes, after I make a set of disk images, I do copy them to
CD, one by one, and I always verify that the CD file matches the disk file.
(Easy CD Creator does this automatically.) More recently I have been
copying images to DVD, sinc ethat is faster, and one DVD can hold the whole
image. However, not all backup programs can restore directly from a DVD.