What Chinese visa do I need for a 3hr transit in Shanghai?

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As an Australian transiting through Shanghai, you're actually entitled to the 144-hour visa, which lets you go anywhere in the Shanghai area and beyond. So that part is definitely fine.

It's been a while since I was last in Pudong, but assuming it's similar to Beijing, there is clear signage on arrival for where to go for on-arrival visas. Once you've found the right place, it's like regular immigration: queue up, get stamped, you're in.

However, a 3-hour connection with separate tickets and baggage to collect is indeed very risky. Chinese airports are notorious for air traffic control delays (although incoming int'l flights do get priority), and even if you're on time, it's all too common to get stuck at immigration for an hour or two. I would advise you to push back your connecting flight if you can, or at least have a plan B ready.

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