I have a son as well that is in the challenging 3. He was an angel when he was 2 years old. But as soon as he turned 3 oh my did he change from hugs and kiss to back talking, hitting, and acting out. I tried the time out (which worked with my daughter), and it work for a while but then he started acting out again. I found finding activities that he could do at his age level real worked for me.
I sat up activity stations in the livingroom (where we were most of the time). Like puzzles, building blocks, coloring books, and level 1 reading and picture books. I have him change station every 10-15 minutes while I am busy doing something or taking care of his 4 year old sister's preschool lessons. If I see that he is getting bored with something before that then I have him change to another activity. We also have quite time, where he has to lay down after lunch time for an 1/2 hour in a special spot in the livingroom. I tell him he doesn't have to sleep he just has to rest his body because its tired. After nap we start the activities again or go out side if its not to cold or nasty out and go for a short walk or something.
Every once in a while now he starts acting out and when he does I have him sit down in his special spot that he has quite time in for about 3 minutes or so and then he is fine again.
With my daughter she started at 16 months old and didn't stop acting out until now and she is now 4 1/2 years old. I was told that it starts getting better when they are between 4 1/2 -5 year old. And my daughter is now 4 1/2 so I guess it is true. Mine are 16mos apart, so I know what your going thru. Good Luck. :) There is a light at the end of the tunnel. :)