My burner for my computer is currently out of commission, and I must use a windows computer to burn it.

How do I compress the retail OS X image down to 4.7 GB to fit it on a single layer drive, using Windows?

Use TransMac (30-day trial). It can read .dmg files.

It is currently in .iso form, I simply need to remove the files. Can I mount it, remove the files, and then recompile the .iso?

You would need an app that can modify .ISO files. Windows itself doesn't have this support.
I'm not sure of an app that works like disk utility, either.

I use UltraISO and it's worth every penny's.... open/create/edit/burn

I think it supports all known images, but you have to convert them into ISO to edit them...

my 2 cents