This question is answered elsewhere. The N4 is a complete redo of the AVIC N series. I have an N3 and just upgraded to an N5 (same as N4 but with new Nav Discs). Here are some of the major differences:
1. Screen Size, N3 - 6.5 Inches, N4 - 7 Inches
2. Touch Screen sensitivity. The N3's touch screen is less sensitive than the N4's, the N4's touch screen is more responsive and snappier.
3. IPod Interface. The N3 cannot control any video through the iPod Interface, the N4 has control over video from the head unit.
4. Ergonmics changes- The N3 used a small "joystick" like device to go back and forth between stations or songs, the N4 uses a more sleek two way button.
5. Changeable Illumination and Background Colors.
7. USB expandability
8. More audio/video formats supported.
9. Single Cable (CD-i200) ipod input on N4 as oppose to a separate unit and cable (CD-IB100II)
There's more but that what comes off the top of my head.
And to answer your other question, no the N4 brain will NOT work on the N3 since there were fundamental changes with the head unit itself.