OK now it makes sense. The CD device has its own AV port with the CD expansion sound channels mixed. If you instead use the RF or AV (in the case of a CoreGrafx, SuperGrafx or LT) port on the console, the CD audio would be missing.
Long story short, the SSD3 is missing this CD AV port, and RGB is the only option since the AV on the console won't work with CD games.
No AV is not good. I think I remember hearing that some video features only works on the PC Engine's composite video output, and not on the RGB.