Big Cliff is correct about the presentation of the 3wt rod. It will work fine for small water and small fish situations. I have a Echo 3wt that works fine for trout in 10-16 inch range. Here is a post by our own The Full Creel that discusses some aspects of a small stream rod that you may find helpful. Its titled The Perfect Small Stream Fly Rod
by Steve Robbins.
As far as the flies are concerned. Big Cliff likes the nyphing or wet fly fishing. I prefer dry fly fishing. I guess I have caught the most trout on a plain jane Caddis Fly. I have the following in my fly box: Caddis fly(olive & black body), Blue Wing Olive, Royal Wulff, Adams, Black Caddis, Orange Stimulators, Royal Stimulator, Griffins Nats and Cream Midges.
Otherwise use whatever you catch fish with in your area. It's different everywhere you go it seems. I hope this helps. When Steve gets the chance I'm sure he can help you as well.