Is it a retarder or exhaust brake?
I had thought that the retarder was an Allison transmission thing... not an exhaust thing. So maybe someone can fill me in on that detail a little more fully. If it's an exhaust device then is it before the muffler or after?
Staying with 3" is not a problem as far as I'm concerned. The tail pipe is 5" but that's a chrome piece (with a curiously deformed bottom - almost like someone crunched it).
It's just like a big puzzle. 
Craig