I'm sorry to say that most of the "I hopes" in this thread aren't really in keeping with things people from Valve have actually said.
Half-Life 2: Episode 3 is probably going to be a standalone for a couple of different reasons. First, because it isn't really harder to release it with a standalone executable than to release it as an expansion pack. It's just a matter of packaging the appropriate files together. It isn't even harder to download via Steam as it will piggy-back on the cache files for other source games, so downloading it will essentially be like downloading a mission pack in terms of size. It also means that you can play it even if you haven't played any previous Half-Life games. I think it's better to start at the beginning, but I can't blame Valve for not wanting to say "To play this game you have to own these other products" a statement that is anathema to many gamers (See Final Fantasy: Crystal Chronicles).
Secondly, Valve are almost definitely going to be using a newer version of Source than in the Episode 2, since the Left 4 Dead version contains numerous new features, and since they'll probably be adding more features specifically for Episode 3.
As far as length goes it will probably be in the 5-8 hour range since that was the whole point of doing the episodes in the first place. It's not that the couldn't do a 20 hour Half-Life game, it's just that it would take 6 years. On the other hand if they release Episode 3 before 2010 and it contains 7 hours worth of gameplay then they've essentially made Half-Life 3 (20 hours of Half-Life content released after 6 years of development) in the time it took them to make Half-Life 2 but have also released two thirds of it in two sizable chunks over the first 4 years of that time. I leave it to you to decide which way you'd rather have it (Hint: if they had been working on Half-Life 3 instead of the episodes it still wouldn't be out for another year).
As far as a new version of Source goes, maybe you haven't been paying attention. There were new versions of Source bundled with Lost Coast, Episode 1, Orange Box, and Left 4 Dead. All with improvements ranging from HDR lighting to the response rules system that has replaced sycophantic resistance members constantly telling you to reload and since evolved from Alyx occasionally dropping hints and one liners to the survivors in Left 4 Dead exchanging not-entirely-scripted banter.
Man, looking back over this post I realized that I've become quite a Valve fanatic in the past 2 years. I also just remembered that there was supposed to be an episode 3 trailer by the end of '08 that still isn't out. That's Valve time for you.