What are the pros and cons for using a 5 gallon keg for 3 gallon batches of beer? Am I wasting a lot of Co2?
It's not a problem. Runs the risk of oxygen exposure to finished beer if not filled properly, but It can be done at the cost of co2, which is very minimal.
Personally, I purge starsan from the keg using co2 and fill the corney from the outlet port, so there is no air exposure regaurdless of how much beer im putting in.
You will force carb more quickly. If you utilize the larger surface area co2 can contact beer by laying the keg on its side while carbonating.