Bill....With experience using Olympus C-3040, C-4040 and now C-5050 cameras, I think I can compare 3MP, 4MP and 5MP qualities.
As a general rule the higher the MP the better but alot depends on what you're going to do with the pictures. If all you intend to do is share your pictures in email, post them on a website such as this one, or make regular prints no larger than 5x7 for an album to show your friends, then a 3MP camera is great. If you want larger prints like 8x10 or larger to hang on the wall, you'll have to go to 4-5MP.
As for quality, alot depends on the compression you used when taking the picture but if you'll choose the higher compressions, such as HQ or even better SHQ, working with the pictures has more possibities. I'm referring to such things as cropping, enlarging and cleaning up using one of the editing programs such as Elements. You'll be able to take fewer pictures at the higher compressions but after the first few dives you'll get past taking hundreds of shots at a time! For instance, my first few dives with a digital I took about 120 pictues per dive...it was so cool not to run out of 'film'! Now I choose my subject better and take anywhere from 40-70 per dive.
I recommend to get the largest MP you can afford. That way you aren't restricted later on when your needs or wants change. Even though digital cameras are evolving at a very fast rate, new models coming out every 6 months or so, these digital cameras are very hardy and last for years. I have an old Nikon CoolPix 880 that still looks brand new and takes excellent pictures that is 6 years old...it's still going strong! If a housing for it didn't cost $600+ I would be using it.