1. Nah, PS3 ISO TOOLS V2.2 is PC application, this software will help you convert tons of PS3 games (folder format) to ISO in one go, just point it to GAMES folder which contains PS3 games (folder format), choose output location and it will automatically do the rest for you. Link :
https://www.psx-place.com/resources/ps3-iso-tools.68/, before that you need to use multiman and rip your disc to folder format.
2. Some games like MGS4, MGSV Phantom Pain and MGSV Ground Zeroes have problem with PS3 ISO TOOLS V2.02, they wont boot or black screen and some other kind of errors even running from internal drive (MGS4, MSGV Phantom Pain wont install game data or black screen or infinite loading screen), this has been solved with "ps3iso utils v1.9 (original) by bucanero", just run makeps3iso.exe, then copy the link to game folder like D:\Download\Jdownloader Folder\PS3 Games Download\BLES01xxx-[xxxx] and enter, it will ask for name, just enter if you wish original name, then it will ask if you want to split to 4GB part (to fit on FAT32 drives), just press n and it will convert those problematic games to working iso. Link
https://github.com/bucanero/ps3iso-utils/releases, just expand the Asset and download makeps3iso.exe.
As I said, ISO is better than folder format in many ways, if games in folder format work flawlessly for you so you don't need convert them to ISO, but if you want them in ISO format but encounter problem, you know where to find the fix.
I also suggest you find another way to backup your game just in case the physical drive fail some days later, like having them backup on another hard drive beside your 1.5TB ext drive, or using 7zip/winrar and pack them up, create free google account and upload them to google drive, by doing this you will always know your games can be recovered back to you. A free google drive account only gives you 15GB free of cloud storage, but you can create as many as you want. If games are under 15GB, just zip them in one pack, if games are over 15GB, just split them to 5GB/part. Then make an excel list on your PC or google sheet, place the game and google account that contains that game or parts of that game if they are over 15GB. By doing this you will always know exactly which account to download any game in your collection.
3. ISO is superior to folder format in many ways, like I said on previous comment, when you ftp a game from pc to ps3 internal drive by using gigabit connection on both PC and PS3, it takes ~10 mins to transfer the file 10GB (that's 1 file), but in folder format of the same 10GB game, it probably has thousands of small files and take ~30 mins or longer to transfer.
And you use HDD, not SSD for ext drive, it may take more time to load game texture when PS3 has to read files from thousand places (folder format) in your HDD instead of one place (ISO).
But it is personal choice anyway, so if you feel folder format is ok, it's ok.