using /dev/zero to create image file in linux
dd if=/dev/zero of=imagefile.img bs=512 count=200
(creating a 100mb image file)
/sbin/mkfs.ext3 imagefile.img
(formatting with ext3 type of filesystem)
Now you have an image file you can mount using the loopback device:
sudo mount -t ext3 imagefile.img mountdir/ -o loop
sudo chown username:username mountdir
now you have the image mounted at mountdir. put the contents you want into it.