It's not really necessary to convert the install CD to an ISO, you can simply copy the files from the CD to a USB thumb drive, plug it into the SP3 and run the install from there. The cases where you would need to create an ISO are those where the CD is copy-protected (a game perhaps?) or if the CD is bootable. Typically only OS install disks are bootable so you need an ISO of say a Win XP disk in order to create a VM running XP in Hyper-V.
You can create an ISO from a disk using any number of CD burning softwares. My choice is a program called ImgBurn but there are many others.
One thing nice about ISOs in Win 8 is that if you double-click on the ISO file the OS will mount it and make it available as another drive.