An ISO, or CD image, can be explained simply as a software version of a complete CD. It's pretty much like a Win-zip file a bunch of files in one file. You can use a program such as Nero to burn this and more image files.
I guess the ISO should perfectly sit in an 700MB CD , although it shows slightly over 700 MB . Maybe the filesytem takes some space.
Or try winrar or winiso to remove some files[that are not needed] from the ISO if it wont burn in an 700 MB disc