Thank you for the advice. 

Will it not also be sending a signal via the 7-40? Will there be a conflict?

There will be no conflict.

The digital input "overrides" the sound input from PowerLink, The speakers will receive to sound inputs when you are listening to the  BS9000, and they will choose digital automatically.

It will work fine. Bear in mind a few differences in operation -

• You will loose the bass/treble/loudness controls when listening to CD.

• The sound will not go up and down as smoothly, so if you hold down the vol.up button excessively, you'll find the volume may suddenly jump up to the kind of volumes your house probably wasn't designed to handle (or your ears).

Worth it though. IMO the sound improvement is very marked.

I've never had any trouble with the sound jumping up or down when I adjust the volume. Quite ingeniously, the loudspeakers adjust by exactly 1dB with each press of the up or down arrow on my Beo4.

One tip, since in s/pdif coax mode you won't have the powerlink control of the speakers and the synchronisation cable doesn't do much that I've noticed: run the speakers all the way down to silent. You'll know when they bottom out by watching the green indicator lights. Go down press by press on the volume control, until you are bottomed out.

Then move up until you have a listening level you are comfortable with. Store this level with A.SETUP using LIST.

Should the speakers drift for any reason, as you're adjusting the volume (could be that both don't pick up a command with the Beo4), then you can reset to this preset volume level, and you'll know both speakers are at the same level.

I have different units connected to the Powerlink and s/pdif IN connectors on my BL5s, and haven't had any trouble with that.

Some of the "sound improvement" many tout after having heard the s/pdif connection version of a soundtrack is due to a marked increase in signal output level from the speakers. When you match the corresponding signal output level through Powerlink, to be at the same listening level as the s/pdif, you'll find that the two versions are not as unlike.
However, feeding the s/pdif straight to the BL5s is an advantage, due to their special signal path - the signal is spared at least one conversion.
 

The speakers will be controlled via PowerLink if kkgd0298 connects the digital connection from his BeoSound 9000.

There's no need to change the option setting - they should still be in option 0 as when connected via PowerLink. The BL5s will simply make use of the digital input when it's available, and all the control functions will happen down the PowerLink.

As I say, it'll behave as normal, but use the digital signal instead of the analogue audio signal down the PowerLink. You will notice that the sound won't increase smoothly if you hold your finger down on the up/down buttons due to the way the data is sent down PowerLink in packets (each packet corresponds to one of these 'jumps' in sound). You do however, still get every volume step you had before, just be a little more cautious with the volume control.

RE: tone controls, no, you lose tone control functions when listening to something off CD, but the tone controls will work for everything else. This is because the BeoLab 5s don't do internal EQ'ing (other than the obvious ABC), the tone controls only work if the sound is passing through the circuitry in the BeoVision or BeoSound (which it isn't when using a digital source).