It's usually blank side down - the upside usually has printing on it unless it's a printable CD/DVD in which case the shiny side would be down, I think, because the printable surface is usually matte.
Well the only way I ever have done it is by selecting Image Format = DVD/CD master; and Encryption = none. And this creates a *.cdr file. I don't know any other way, but the Disk Utility Help gives a method that I copied below.
On this issue of the blank DVD being ejected. If you open Disk Utility first, then select the image you want to copy on the left window, and then select "Burn" from the top row of buttons, you'll probably get some type of "waiting for blank DVD" and it should accept the DVD unless there is something wrong with it.
Audrey
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Duplicating a CD or DVD
You can use Disk Utility to quickly copy many types of CDs and DVDs.
Disk Utility cannot create usable copies of discs with an incompatible format or discs that are copy-protected. (These include most commercial movie DVDs and audio CDs and some software and data discs.) To copy music from an audio CD to another CD, use iTunes, not Disk Utility.
To duplicate a disc, you first create a disk image of the disc you want to copy, and then use that image to burn copies. To burn a disc, you need an optical drive in your computer or connected directly to your computer. You can’t burn a disc using a remote optical drive.
To duplicate a CD or DVD:
Insert the CD or DVD disc in the optical drive, and select it in Disk Utility’s list of disks and volumes.
Choose File > New > “Disk Image from [name of disc].”
Type a name for the disk image.
Choose “compressed” or “read-only” from the Image Format pop-up menu.
Choose “compressed” to create a smaller disk image. Choose “read-only” to create a disk image that’s quicker to create and open.
Click Save.
After Disk Utility creates the disk image, eject the original CD or DVD.
Select the disk image in the list of disks and volumes, and choose Images > Burn.
When the Burn Disc dialog appears, insert a blank CD or DVD, and then click Burn.
You can continue using the disk image to create as many duplicate discs as you need.