Try something like this (untested):

  #! /bin/sh

  fifo=/tmp/discover-vnc.fifo
  rm -f $fifo
  mkfifo $fifo

  dns-sd -B _rfb._tcp >$fifo &
  pid=$!

  while read line; do
    case $line in *_rfb._tcp.*)
      # do something here.. then test
      # if flag=3 and break otherwise
    esac
  done <$fifo

  kill $pid