Check the Dios Mios guide for information on how to use DMToolbox to massage your GC .iso files to create an output directory which gets placed on your hard drive's "games" directory.
Also make sure that your hard drive is FAT32 formatted with 32k clusters. Any deviation from that will prevent DM from working. This is also mentioned in the guide.
If you are trying to play an NTSC game on a PAL system, make sure you select to force the video to PAL mode to match your TV. This is a game-specific setting in the USB Loader which can then be saved so you don't have to change it each time.