I briefly owned both for a short while, however I ended up selling the 3rd gen shuffle because of the whole button / remote thing. I personally thought it sounded very good, from what I can remember I thought the SQ was certainly on a par with my old 512mb 1st gen shuffle.
The voice over function one the new Shuffle is absolutely superb, as is the option of being able to select playlists for the first time. But it was one major flaw that really bugged me - I couldn't get on with the lack of buttons on the actual device.
Having all the controls on the headphone is too damn annoying, it limits your choice of headphones, in as much as your stuck with the stock iPod earbuds. Although this can be resolved thanks to Scosche and adaptors like the tapstick devices.
Sorry not much of a review for you, since I sold the 3rd gen Shuffle after a month of ownership; I can't sit down and do a proper comparison for you.
If anyone ends up buying one, don't go and purchase the Scosche IRM35 tapLINE Control Headphone Adapter, as I still have mine and I'm willing to send it FOC to the first person who sends me a PM - I'd sooner give it anyway to someone from Head-Fi who'll make use of it (see link below for further information).
http://www.amazon.co.uk/Scosche-IRM3.../dp/B002CVTU56