You can definitely upgrade from R1 directly to R3. The correct upgrade kit from Nortel is NTAT0138.
You get a keycode and three CD ROMS. The upgrade takes around an hour. I've upgraded a few from R1->R3 now and haven't had an issue so far.
After you complete the upgrade and have tested the system thoroughly you should also upgrade the manufacturing image on the BCM50. If you don't do that and then do a level 2 reset you will find the system has reverted back to a Release 1 system again. Updating the manufacturing image avoids that. Nortel say it takes about an hour but it seems to complete in about 40-45 minutes and doesn't require a reboot nor does it interupt service.
The manufacturing image doesn't come as part of the upgrade kit, but is available for download from nortel.com
Also release 5.0 is now available, however you can't directly upgrade a release 1.0 BCM 50 to 5.0 you have to upgrade to 2.0 or 3.0 first.