M3 performance needed for top residency?

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You'll be fine. A few honors and HPs and doing well on step 2 will put you in good standing for almost all top tier psych or neuro programs. Just craft a package that exemplifies your strengths.

I disagree, unless you're applying to some of the surgical specialties or a community program, a PhD is seen as a positive asset in most settings. Now a PhD will not overcome a poor clinical performance.

I'm applying IM. I had 3H, 4HP, no AOA/GHHS, 270+ step2 and so far getting decently competitive interviews.
 
Overall you have a good shot, but year by year the pool is shallow so there'll be variation in competition level. You should aim to do an away rotation (or two) at the top programs of your interest. This would enhance your chance to match by a lot.
 
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