You cannot convert an ISO directly to a PKG in one step. First, use PS3 ISO Tools to extract the ISO into a standard folder format (often called "JB folder" format).
Go to > Install Package Files and install them in order (Game, then Patch, then License). Pros and Cons of PKG Repacks convert ps3 game iso to pkg repack
Drag your game folder onto the executable. You cannot convert an ISO directly to a PKG in one step
Move the contents into a dedicated workspace folder, typically named something like CFW to OFW depending on the helper tool you are using. convert ps3 game iso to pkg repack
The tool will process the files and usually generate two main folders: full game and game update .