I do what you want to do using Powerquest Drive Image Pro and a CD rewriter.
Drive image Pro is run from a Dos prompt (not from within Windows) and allows you to create an image of any drive, with one minor drawback, you can't store an image on the drive that you are copying, nor can you write the image straight to CD.
There is another limitation, at present the most that you can get on a CD is 700Mb, Drive Image allows you to compress the image by upto 50%, so you have to limit the amount of data on your C: Drive.