Just installed xcode 3.2.2 (on Lion) so I can test my app for the iOS 3.0 and 3.2
Created a simple test app based on View application template.
Just trying to build it gives me the following error.

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I doubt you can use XCode 3 with Lion, even I was using XCode 4 and had to update to 4.1 to run on Lion.
However if using XCode 3 is mandatory for you I found some post explaining how to do so but it seemed tricky. In his original post he clearly mentions the same problem as you’re having.