Step 1 (Burning the ISO) is the critical step.
An ISO is a special kind of file that contains the complete image of a CD. You don't want to just put the ISO onto a cd, you want your burning software to "open" the ISO and create the cd that it represents. Hard to explain, obviously! Sorry if I don't make sense.
You might try the directions found here:
http://members.home.nl/lsnoek/iso.htm
I too scratched my head for a bit before finding that. I knew what the ISO was, but at first I couldn't figure out how to get Nero to use it correctly.
Good luck!