I don't have 3.5, but from my understanding, it IS better than 3, in that it takes care of some game balance issues that were present in 3rd, such as the fact that monks are EXTREMELY munchkinized, and are way more powerful than any other class in 3rd. I don't know all the balance issues, but I'm told it's way better. Also, I don't know how you used to play your old campaigns, but 3rd edition is now heavily dependent on magic items. In earlier versions, wizards and magic were supposed to be some "rare" oddity, but now it's almost expected that you make sure your players are stocked up with magic swords, armor, and whatnot. It's pretty much the only way you can survive some combat. Monsters don't give out flat experience rates, but have a "challenge rating", which is cross-referenced with a chart, so that you get more experience for winning more difficult fights, but you couldn't expect anything if you just ran around slaying squirrels. The problem is some of the monsters are drastically underrated at higher levels. You'd be surprised at how much you'll bust your butt trying to kill a slaad(and survive!), only to find out you didn't get any experience for it.
Oh! That's something else, the experience is now "encounter" based, and the way the system is set up, it's recommended that you pretty much only dole out experience for combat, with small experience bonuses for good ideas and whatnot. It might take the incentive away to roleplay well for some.
Before I go off on too much of a tangent with details, I'd obviously recommend the Players handbook, the Dungeon Master's Guide, and at least the first two Monster Manuals. It seems like they're periodically releasing new ones like they used to do with Monstrous Compendiums. If you like to go all out with class extras, you could get the class guides, like Sword and Fist, Tome and Blood, etc., but if it's your first time with the new edition (which I'm obviously already presuming, since I just rambled on and on about game details!), start with the core books, since there's plenty of feats, skills, and prestige classes to keep one occupied until getting adjusted to the d20 system. I would recommend the class supplements, because they can be adjusted to any campaign.
I don't know what campaign would hold your interest the most, but when Wizards of the Coast originally wanted to focus on Forgotten Realms and Greyhawk so they wouldn't "flood the market" with choices, they pretty much pulled back on that. You can get Dragonlance, Ravenloft, and then there's also Eberron, which a lot of people I've talked to like. I don't know much about it, though. I always wanted to have a Planescape campaign, but they didn't really translate it over. There are planar rulebooks, though.
Shoot, thinking back to passing through Waldenbooks the other day, there are so many options now that I realize I've fallen so far behind and have no idea where you should start besides core books and class supplements.