An ISO is actually not a video file, it is a container... somewhat like a ZIP file that contains other files
I do not know if it will PLAY what is inside an ISO, but I use Imgburn to write an ISO to DVD
Read http://forums.adobe.com/thread/1322583 for notes on installing Imgburn WITHOUT any toolbar add-ons... Set Imgburn to use the slowest burn speed your drive and media will use... I set my burn speed to 1x and let Imgburn adjust to the actual minimum
John's right, of course. You can't edit or play an ISO in Premiere Elements. It's an image file for a BluRay disc, not an individual media file.