Burn a CD in Mac OS X that can be read by Mac OS 7. This guide
will tell you how to burn a CD from within OS X that can be read
by OS 7.6.1. I haven't been able to verify whether or not this
works with 7.5.x or 7.1.x.

The basic principle of this tutorial is creating a disk image in
OS X, then formatting it as a Mac OS Standard disk, then dragging
your files to the disk image, then burning the disk image.


STEP 1
On your OS X computer, launch Disk Utility, which can be
found in your "Utilities" folder inside your "Applications"
folder.

STEP 2
In the window that appears, click on the "New Image" button. Give
it a unique name, and make sure to save it to the Desktop. Set
"Size:" to the size of your blank CD media. Set "Encryption:" to
none, and set "Format:" to read/write disk image. Click the
"Create" button when you are finished.

STEP 3
After the disk image creation process has finished, you should
see your disk image in the list on the left hand side of the Disk
Utilities window (as well as on your computer's desktop). If you
do not see it there, you did not save it to the desktop, and
you'll have to find it. Highlight the disk image you just created
in the Disk Utility list. Then, click the "Erase" tab, and and
select "Mac OS Standard" from the "Volume Format:" drop down menu
that appears. Give the new disk a name such as "Mac OS 7 Stuff"
by entering it in the "Name:" field. Note that this will be the
name of your mounted disk, not the name of the image file. Once
you have changed these two settings, click "Erase." The new disk
should appear mounted on your desktop.

STEP 4
Minimize the Disk Utility window to get it out of the way
temporarily (we'll need it again in a moment). On the desktop,
start dragging the files that you want to bring to your OS 7
computer into the newly created disk image. Keep in mind that if
you downloaded software from this or any other web site, it is
best to keep it in it's original compressed image format (such as
..sit, .bin, .hqx, or .img). If you don't your icons and icon
placement will probably not transfer to OS 7 properly, because
Mac OS X does not maintain a proper classic desktop database.

STEP 5
Once you've dragged all your files into your "Mac OS 7 Stuff" CD
image, go back into Disk Utility, make sure the disk image is
selected from the list, and click "Burn" in the upper left-hand
corner of the Disk Utility window. You will be prompted to insert
a blank CD if you have not already done so.

CONCLUSION
Congratulations, you should now be able to read this CD in any
Mac OS 7.6.1 computer with a CD-ROM drive. Be mindful that some
early CD-ROM drives physically can not read burned CDs, but so
far most people seem to do just fine following these
instructions. 
.