No, you just need to make sure Joliet or UDF are selected in the 'File System' dropdown (those along side ISO9660 are fine - Windows will always use the best one when displaying filenames).

If it just says ISO9660 then you're limiting yourself.

Changing the restrictions should only be done as a last resort or if you know what you're doing and know that what you're building requires such measures.
Level X is out of spec so use it with caution.

ImgBurn defaults to ISO9660 + UDF. That should have been fine for most projects.