Booting from/ Installing a .dmg, is it possible?

When I first got my mac it came with a disc with Tiger 10.4.10. Then when Leopard 10.5.0 came out I got the uppgrade disc (note the upgrade disk means you must have 10.4.11 and all available updates installed prior to installing the Leopard disc.)
A couple of months ago I got a bigger HD, so I had to go through the whole installing process; install the 10.4.10 disc, install 10.4.11 + updates, install 10.5.0 disc, install updates to 10.5.4.

So my question is:
As my HD stands now, it has 10.5.4 installed with all available updates, the apps I use, and no documents/music/video files.
Is it possible for me to create a disk image of my system, burn it to disc, then if I need to reinstall my system just put in this newly created disc and install it?
Also, as its a .dmg, would I have to restore first?


Thanks for any advice, b.