Dunno if it´s Satourne version 3 I´m using, but on the on the version I am using, this is how I do it....
You´ll need to get hold of a freeware prog called Daemon Tools. For the love of criminy, when you install it, don´t let it install the toolbar, it´s adware. Luckily, you can just untick the box. Other than that though it´s fine. DT creates a virtual CD/DVD drive, which can ¨mount¨ your ISO or MDS files as if it was actually a disc. When DT is installed, mount your game file as above. When you´ve got the prog, you´ll understand.
Open Satourne, and configure the CD setting so that it´s pointed at your virtual drive. In my case it´s called a ¨G¨ drive. You´ll know if it´s worked because the game info appears in the box at the bottom. Obviously you´ll have to make sure you have set the other config options for display, sound etc. You should then be able to press the ¨play¨ button for the emu to begin. Get ready for some glitchy Saturn fun!
So that's it. Let me know how you get on and if you have any probs. I'll keep an eye, and if I can help I will.