iDMG is an easy to use application to create .dmg files of a folder with a simple drag and drop. Also supports encryption and internet enable. HUD style!
AIKOUSHA It's too bad this doesn't work below 10.5, as there is no way I'm upgrading until there is a stable alternative to classic and a few other things in 10.5.
Hopefully the developer can re-code slightly for earlier systems. (Version 1.30)