I've seen many used 3" magnum 1100s for sale (check the auction sites) and a good friend of mine has one as well. Did they stop making them?
The 3" 1100 was produced before the introduction of the 11-87, and only cycles 3" and heavy 2.75" ammunition.
Is that the ONLY reason they make two different self-loaders (yet there are 1100s out there that also take 3" shells)?
Yes. Many parts will even interchange between an 11-87 and 1100.
Is the 11-87 more versatile simply because it takes both size shells?
Essentially, yes. However the 11-87's self compensating gas system is rather primitive compared to other modern gas operated automatics, and will sometimes balk at the lighter target loads. The 11-87 is built as a hunting shotgun, not a target gun (though some 2.75in only target models were produced in the 90s when the 1100 was discontinued for a short time).
It also needs to be cleaned more frequently than, say, a Beretta 391 or Browning Gold. The 1100 also shares this trait.
The whole issue of 1100 vs. 11-87 is very convoluted. Basically the 11-87 was an 1100 upgraded with a self compensating gas system. The 1100 was gradually phased out of production in the 90s, but brought back when the 11-87 started losing market share in clay sports to guns like the Beretta 390 and 391.
Now 11-87 production has been cut back to just a few rough duty field models (marketed towards waterfowlers for the most part), while the 1100 remains Remington's target gun and has been worked into a tactical version too. To muddy up the waters further it looks like Remington is marketing their 105 auto as an upland gun and have cut the upland style guns from both the 1100 and 11-87 lines.
Clear as mud?