i know this maybe painfully obvious, but i know the way has more tonally options but does having just the three make the pickups sound better or different in any way? louder or more dynamic?

Nope, the only difference between the 3way and the 5way is that the 5 way has two more options (bridge-middle and middle-neck). They're just switches

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2010 American FSR Thin Skin Strat
2009 Martin OMC1KE Acoustic
2004 Mexican Strat HSS Modded

POD HD500

the 5 way gives you two more options, bridge middle and middle neck, then the three way switch. It is possible to get the bridge middle and middle neck option in on a strat with a three way switch by leaving the switch inbetween selections (this is how the 5 way switch was originally "discovered" many guitarists left the switch in between positions to get new sounds and even jammed the switch using tooth picks and such)

When I bought my first Strat in 1974-a '65-it had of course a 3-way switch and I wasn't long finding the lush"out of Phase"setting between the pups.It takes a bit of diddling to get both pups engaged in this manner and is very difficult to do while playing live. When I bought my lefty '78 Strat it had a 5-way but I had a 3-way put in because when playing something like Voodoo Child(slight Return)and I had to go from the bridge to middle pup it was much more effective to turn the tone controll on the middle pup to full bass when doing the fake wah wah effect than it would be with a 5-way.All my Strats now have 5-ways-except of course the '65 which I'll never change.

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'65 Strat,65 Mustang,65 Jaguar,4 more Strats,3 vintage Vox guitars,5 Vox amps,'69 Bassman with a '68 2-15 Bassman cab,36 guitars total-15asst'd amps total,2 vintage '60s Hammond organs & a myriad of effects-with a few rare vintage ones.