You are looking for the transcoder-section in Plex settings.
However, as noted earlier in the thread, the current kernel does not support Arc, so it doesn't actually do anything. It would be very useful if Limetech posted a roadmap somewhere (especially kernel-related). I think we're stuck on 6.6 for now doe to ZFS issues, but I forget 😃
Edit: I seem to recall it worked like 3-4 months ago on one beta 3 or 4 if you want to roll back to that.