Xcode 3 shouldn't install on Mavericks, and if it does it definitely isn't supported by Apple.
To avoid the login crash try entering your login credentials, and immediately after pressing return, hold down the shift key to prevent anything from loading. IF that doesn't stop the kernel panic, then you will need to wipe, reinstall, and resort from your Time Machine backup.
The best bet for using Xcode 3 is to dedicate an old machine to running an OS that supports Xcode 3. From my notes it looks like that would Snow Leopard (10.6). Another alternative is, if your Mavericks machine is old enough to run 10.6, install that on a partition or a dedicated hard drive. I stopped working for a company this year that was still using Xcode 3 as the official compiler for release builds.