I am thinking of purchasing a DTP program but don't need the $699 CS5 version. So will CS3 work with my Mac, running on OS X v.10.7 (Mountain Lion)?
CS3 software (InDesign and/or any other components of the Creative Suite 3) is no longer available from Adobe or any authorized resellers. If you are attempting to buy a copy of CS3 off of eBay, Craig's List, or other such marketplaces, buyer beware. Much of that stuff is pirated or is not eligible for activation. A buyer should require that the seller guarantee that the serial number is valid and capable of being transfered to and re-registered your name. (For that matter, CS5 isn't still available, either!)
In terms of compatibility with MacOS 10.7, CS3 came out long before MacOS 10.7. Adobe does not officially support this configuration with CS3 and you should expect some incompatibilities.
here in Germany I have clients which needed an older version for new staff (to be compatible with their clients). And Adobe Support made it possible when they bought the actual version of the Creative Suite that they got a serial key and download link for the older version. But this possibility exists not via retailers or others, only with Adobe directly.
Of course it is dangerous to buy an old version or any version very cheap.