404 is right about this one.Neway you may want to try "virtual cd".Its compatible with isos and windows xp.I hope it supports psx cds as well.
You can download the demo version from home page. http://www.virtualcd-online.com/
There's another program called CDSpace. It has several functions, such as extracting CD images to ISO or its own format(I forgot the format), and it is good because this format can be compressed, so a 700MB ISO takes only 400MB. Of course, only CDSpace can read this format. ePSXe can't read it directly from "Run ISO", so you would have to mount the image and use ePSXe's "Run CDROM" to work. It also has a Daemon Tools feature that lets you mount an image to a virtual drive(up to almost 30 drives). It worked fine for me. Get it here.