A LR35 crew descended toward the MDA prior to reaching the FAF and; after an ATC low altitude alert warning; regained their instrument scan and situational awareness.

Narrative

I briefed the VOR approach and noted the distance to descend to the MDA to the Captain. The aircraft was vectored to the approach course. Upon joining the VOR approach course the Captain asked me if he was able to descend from our current altitude of 2;700 FT. I responded yes; not noticing our distance from the VOR. The Captain began to descend to the MDA of 1;220 FT. Both of us started noticing [that] we seemed very low. Approach notified us; 'Low altitude alert' and of the current altimeter setting. I immediately looked at the DME that was tuned to the airport VOR/DME and it said 17 NM. The altimeter read 1;700 FT and we leveled off. The correct altimeter setting was already set in the aircraft. We were in VMC; but neither the Captain nor I noticed we were more than 10 NM from the airport until we received the low altitude alert. The flight landed without further trouble. This incident was caused by a lack of scan of the instrument panel by both the Captain and myself. Also; situational awareness was not prominent with either of us not realizing our distance from the airport and VOR.