Re: the real SEGA MEGA-CDII
You should be able to use a burned image with an emulator. However, I am unsure about the actual CD unit.
Also you have to make sure the audio is in the correct format if you want to use it on the real unit (convert from MP3 to a WAV should do the trick)
There have also been issues with some games where the time on the music tracks (possibly video?) don't match up and the game won't play right, or at all.
It's all trial and error
Re: the real SEGA MEGA-CDII
I think the MegaCD II can read burned discs without modding, but I'm also not sure.
The best thing for MegaCD ISOs to do is to get the TOSEC ISOs. Just Googling should get you a link to the project (not the ISOs!).
These are known to be good. You should stay away from ISO+MP3 rips, since they're mainly crap.
Re: the real SEGA MEGA-CDII
Mega CD can read burned disks without modding.
They should be burned on 1X or 2X though.