Wow, you're wrong! It's the best. I've always thought it was the best year. It's when the show really hit top gear. I stopped short of saying matured, because it did that towards the end of 2, but as a whole, everything about S3 was better, that is to say, the characters, character development, plot, guest characters, individuals and thematically.
I think it has one of the worst structured story arcs. It was their first attempt at having one overflowing arc throughout the 22 episodes (the Angelus thing from S2 is more of a mini-arc) and I don't think it quite worked. I know that many don't love S4 but I always felt that was the first one to have a brilliantly structured arc that truly felt like they planned it all from the beginning. Right from the end of the first episode, "The Freshmen", you see members of the Initiative appear. I loved how S4 put little clues like that throughout the season. You really got the feeling that the writers knew where it was going.
S3, though, didn't feel like that. I found it far too fragmented. I think it may be because of Faith, who we know is going to play a big part, and yet she kept disappearing in between episodes. And there's the fact that we thought Mr. Trick was going to be the Big Bad but then they dumped him half-way through, I think. S3 also had these overlong character arcs that didn't quite seem to go anywhere. The reason why is, I think, they were planning on moving Cordelia to
Angel next year and so they had to make her split up with Xander. So they came up with the Xander/Willow thing that lasted about four or five episodes but got in the way of the main arc. What was also annoying is, after that event, Cordelia was reduced back to her S1 self. After "Bewitched, Bothered & Bewildered", the character of Cordelia seemed to develop, but after splitting p with Xander, she went back to normal. Fortunately, they began working on her character again on
Angel. They also had to bring Angel back from the dead, so he can also have his own show, but he spends the majority of the season not really doing anything, like Cordelia.
I also didn't like "Graduation Day Part 2". I think that's one of the weakest season finales they've done. And so, because it's the last episode, you remember that more clearly than the others. I think that when you're underwhelmed with the last episode of a season, you tend to not think that highly of the season overall, like a great movie with a bad ending. That and "The Prom" (also very near the end) are the two weakest episodes, but the rest of S3 is nothin gbut great episodes. It just doesn't work as one whole season.