The robots.txt file tells phpDig (and other search engines) which directories you don't want scanned. So if you disallow all your directories but the one you want scanned in the robots.txt file, you'll effectively limited your scan to that directory.
The file should go in your root directory, or else it won't work. Here is more info on it:
http://www.robotstxt.org/wc/exclusion.html#robotstxt
As for embedding, check out the HTML source code that starts with this:
Code:
<form action='demo/search.php' method='get'>
<input type='hidden' name='template_demo' value=''/>
<input type='hidden' name='site' value=''/>
<input type='hidden' name='path' value=''/>
<input type='hidden' name='result_page' value='search.php'/>
......</form>
Also read the documentation (link at top of page). This has the answer to both your questions. Someone else might know a better way of limiting phpDig besides the robots.txt file (which will also ban google and other good spiders). Good luck.