We call repositories "services" in SUSE Linux Enterprise.
These commands have been tested on a SLES 10 SP1.
1) First create a directory where you will store your ISO files.
2) Now create your ISO
mkisofs -J -R -iso-level 4 -o /home/sources/sles10sp1.iso /media/SLES10SP_001/
3) Now we add the ISO as a service (installation source)
zypper sa "iso:/?iso=/home/sources/sles10sp1.iso" "SLES 10 SP1"
4) Verify that the service has been successfully added
5) Now we can delete the DVD as a service
zypper sd 1
6) Finally we now test the ISO as a service and install a package like nmap
zypper in -y nmap
Disclaimer: As with everything else at Cool Solutions, this content is definitely not supported by Novell (so don't even think of calling Support if you try something and it blows up).
It was contributed by a community member and is published "as is." It seems to have worked for at least one person, and might work for you. But please be sure to test, test, test before you do anything drastic with it.