It makes me sad that there is even a question that 3 is too old for a baby doll. My DD will be 8 in a few months and loves her dollies. I think the media has so swayed our idea of childhood that we forget how long it really lasts.
ETA My above statement was in no way directed at you OP. I too find myself second guessing what is and isn't age appropriate. The media forces kids to grow up much too quickly. I just try to remember myself as a child. And yes, I was playing with dolls even into middle school.