Good luck to you John Durian. Yeah, I've been really impressed and pleased with my recruiter. You're recruiter, however, might not necessarily be lieing to you because frankly I don't know how many people they offer 3 or 3.5 yr scholarships, it could well be around 30 .(unless he said you could still get a 4 yr, that you can't)
As for choosing between a 3 yr or 3.5 year, it really boils down to two factors, 1) would you prefer the Army or private practice? and 2) do you want to specialize?
If you want to stay in the Army for a long time, or if you want to specialize, I recommend taking the 3.5 yrs. If you want to get out asap and just want to be a General Dentist, take the 3. If you take the 3.5 yr, you are losing out on a year of your maximum earning potential (w/ the 4 yr commitment), which for a GD lets estimate at 75 K more than what you would earn in the Army. I added up the benefits of the scholarship, including tuition, books, the stipend, the signing bonus, what you would spend on interest for an extra semesters tuition- it all comes out to about 75 k too. So really, there is no financial gain between 3 yr and 3.5, so just go where you want to be (army vs private practice). If you want to specialize, however, and want to do it through the Army (as you should), then you might as well take the 3.5 yr, bc you are going to owe time for your specialization (the time you owe for specialization runs concurrently with your original HPSP committment)
Take endo for instance, its a 2 yr residency w/ a 3 yr payback (according to my recruiter). If you get endo right out (which seems almost impossible, but some of the other specialties are possible). But let's just assume for a second you miraculously get endo right out of dental school, you will spend a total of 6 yrs in the army (2 yr residency + 4 yr HPSP payback, during which your Endo specialization payback is also fulfilled). If you want out of the Army, you are only screwed if you decide to specialize at the end of your HPSP commitment. (4 yr Hpsp payback+2 yr residency + 3 yr specialization payback = 9 yrs)
Additionally, if you're like me and want to do the Army thing for its own sake, then take the 3.5 yr. Hope that helps!