Each folder has its own usage, you cannot mix & match, just putting any file in any folder and expecting ps3netsrv to be smart enough to adapt to the situation. That kind of flexibility would require more development work from aldostools & it would make using an organised tree structure pointless, it could be done of course but it would be messier for users though imho.
Right now, I think (Aldo correct me if I am wrong because this is all from my poor & often failing memory lol) ps3netsrv is scanning your GAMES directory & finding the iso file entry then errors out when trying to build a virtual iso structure for it like it would for any JB format game.
Try moving your ps3 iso file into the PS3ISO folder instead of the GAMES folder which should be used only for JB format games (files & folders structure) & try again.
You're right. Each folder has it's own function (GAMES is for game is folder format).
Moving the ISO to the folder PS3ISO should fix the problem.
Anyway I added a condition in the sprx attached to mount the ISO as PS3ISO if it's found in /GAMES folder.