So I just recently installed my new AppRadio 3 and everything is working great so far except for the microbypass. Before I give up on using the microbypass i currently have, I just want to check with you guys to make sure that there aren't any tips or tricks to get it working correctly for the AR3 since it says it was designed for the AR2.

I followed the instructions and have the green wire connected to the parking brake wire coming out of the radio, the ground spliced into the ground in the car's wiring harness, and the red wire spliced directly into the blue and white remote wire coming out of the radio.

When I first installed the microbypass I accidentally connected the red wire to the red accessory wire in the harness, so I'm not sure if this could have somehow damaged the unit. I also have a 12V to 5V step down wired into the blue and white remote wire which I'm thinking could also be a problem. Any insight into this would really help me out, I'm not clueless when it comes to this stuff but I'm definitely new to it.

Eliminate anything you have done that does not conform to the install instructions and see what happens. If it still doesn't work send it back for replacement. Microbypass will likely send you a replacement without needing a return of the original. Good luck.

Use the red power wire. The bypass should require 12VDC to operate correctly.

I had a feeling that it needed 12 volts, but the bypass didn't work when I had it connected to the red accessory power wire the first time I installed it. Even though I would really like to avoid it, I'm thinking I'll cut out the step down and see if it fixes the problem. If not I think I'll just have to assume I got a faulty microbypass since reading around the forums it looks like that has happened to a few other people.

Use the red power wire. The bypass should require 12VDC to operate correctly.

NO absolutely not.

The point of using the remote wire is because it fires shortly after the radio turns on, and its a soft Fire 12v 

The Microbypass It uses the ground as the switch, Circuit Open - Circuit Closed - Circuit Open.

http://avic411.com/index.php?/topic/36352-how-does-the-micro-bypass-work/

Circuits can be sensitive to how they receive power, or how the power is applied, circuits can be shorted out simply from static electricity or it was a DOA bypass, 

I wired my microbypass to the remote turn-on (blue white) before the 5V drop and mine works flawlessly.