A 700 MB CD is 736 819 200 bytes, which works out to 702.7 MB. So CDs use 1024 bytes per kilobyte, not 1000.
Back on topic, make sure your image file isn't compressed. It loses its compression when you write it to CD (a 500 meg CD compressed to 250 will use 500 when written, not 250).
When I downloaded the Neverwinter Nights demo, I simply could not get the image to write to a CD. I ended up just putting the .dmg file on there, so I have to mount it manually. But since you run the game from the HD, I haven't had to take these extra steps yet 🙂