System software bloat has been the bane of many a Mac user as long as there have been Macs. It causes the system to use too much memory, occupy too much hard drive space, and generally slow things down. It's a good idea to clear out the cobwebs from time to time, anyway, but for the purposes of creating a restore CD, it's essential. Any extraneous stuff in your system when you make the restore CD will get restored along with everything else.
Go through your Preferences folder, and get rid of preference files for applications you no longer have installed. Trust me, there will be some.
Go through the Control Panels and Extensions folders, and find anything you know you don't need, such as support files for applications that are no longer there. Don't throw things out if you're unsure whether you'll need them or not - no need to break the system unnecessarily. If you want to be very thorough, get Dan Frakes' InformINIT (http://mc04.equinox.net/informinit) which will help decipher what you need and what you don't in your System folder.
Go through the Help folder, again looking for support files for apps you no longer have. Check out the ColorSync folder and discard references for hardware you don't own. Open up the Printer Descriptions folder, where you'll find literally dozens of .PPD files for printers you don't have. Get rid of them all.
Once you've done all this, your System folder will fit much better on your restore CD. Your Mac will also boot faster and run better.