If you're wondering whether Fantasmic will be too intense for your 3yo, it really depends on the child. Several minutes toward the end of the show focus on the villains trying to defeat Mickey. The entire moat will be set afire, and I believe there is a large dragon that makes an appearance (although it didn't work during our show).
I would use things like the Haunted Mansion and It's Tough To Be A Bug as a barometer. If your child is bothered by any of the more intense attractions, you might consider skipping Fantasmic.
With regard to the dinner package, I don't know that it would be your best option. You are going to be at WDW during one of the busiest periods of the year. Even with the dinner package, seating in the reserved section is first-come, first-served. The dinner package isn't as big a secret as it used to be. I would really question whether you can show up shortly before the start of the performance and get a seat in that section.
Usually during the busy periods there are two Fantasmic shows each night. If you don't want to wait an excessive amount of time, I think your best bet is to shoot for the later show.