You can use Remastersys to create a bootable live CD/DVD image. This will install like a normal Ubuntu CD.
To install Remastersys, you first need to add a repository:
deb http://www.geekconnection.org/remastersys/repository karmic/
You can then install it from the Software Centre as usual.
Once installed, use it to make a 'dist' backup. This means that user data will be excluded from the ISO image.
This is often used to create custom distributions but is still useful for the backup task you have in mind. One caveat is that it may fail if the contents of
/ (minus user data in
/home) takes up too much memory because the ISO file format can only hold ~4GB data. Remastersys uses a file system called squashfs to compress your data so you should be OK with up to ~8GB.