Although I cannot speak for the XBR3, I can tell you that it is a fact that the XBR4/XBR5 does have some motion smearing issues, most specifically in gaming. It is far less of an issue with movies, and as bold as that sounds, I am still very happy with my XBR4. Guess I'm glad I'm not a gamer.
Specifically, I have the Sony KDL-40XBR4, and I have done my best to calibrate the picture (and it looks quite fine), and it does help to turn all picture Noise Reduction off (this is a good suggestion for most LCD TVs, if not all of them). Also, I have made a small service menu adjustment which absolutely improved the reduction of some motion artifacting - a move which made me fall in love with my XBR4 all over again.
It's probably a good idea, for gaming, to shut off the "Motion Enhancer" feature (Game Mode shuts it off, I do believe) with any 120Hz TV. I prefer to leave it on "Standard" for most movie watching.
In the end, although the overall PQ should be better with the XBR4/5 than previous XBRs, I suppose it's more than possible that some aspects, such as the smearing issues, can certainly be worse.
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