go one folder deeper dude, you're highlighing the folder you want the iso out of, you need to go ahead and double click it so it's opened, then hit next.
open the folder (double click on it) don't select it open it when you add it to craxtion to create an iso
weird innit? its a common prob. creating the iso, you try to create it from the folder not the folders contents Just for the record, you tried qwix? great program
Also if you want to create an xbox iso that has mpeg videos on etc, for use with xbmc, use qwix, as it doesnt look for the default.xbe