I am running VV3 under WinXP with no problems. I would suggest that you insure that you have the latest drivers for your video and audio cards, and the newest DirectX as well. Once you have insured that all these are up to date, if you are still having trouble, perhaps you could post you system specs and the exact problem you are seeing.
I just downloaded VV3 Demo last night and it works fine. I'm running XP Pro (all current updates), Athlon XP 1900+, Abit KR7A-Raid, 1 GB ECC Crucial DDR, and a SB Audigy Platinum (for audio and 1394). I mainly use Video Factory 2.0 but wanted to check out the additional features in VV3.