You have to connect it to one of the two RCA sockets in the surround module. These are shown as Input 1 and Input 2. The BV3 will detect automatically the digital input. Definitive worthwhile, digital sound makes hughe difference compared to scart. Your beolab set up is pretty good so you will noticed it.
I also recommend you go for the DVD1. It's quite capable and fully compatible with Beo4/5. If anything, the DVD1 MkI (Philips based) is probably better as it's less sensitive to DVD quality that its succesor (Pioneer). In any case, condition is everything.
See the connectors: