I don't run emulators from my hard drive, just CDs (it's your choice), so to answer your questions....
No, you don't need to "image" the disc with GDFImage or Craxtion, you can just burn in UDF. GDF format is only important for original XBOX games when loading performance is an issue.
CD-Rs don't work in my XBOX, but CD-RWs do. You may have to experiment with media before you find the stuff that works. You can also use DVD-Rs if you wish, but I don't have enough ROMs to fill a CD-R.