Yes, with the right loads .38 Special can be very nearly as effective as any service caliber. For defensive purposes, I'd go with any LSWCHP load that gets decent penetration.
For instance, the following load seems like it would hit like a .40 S&W:
http://www.buffalobore.com/index.php?l=product_detail&p=108
Unfortunately, I imagine that it must kick like one, too, but there are other loads that compromise a little on expansion, and should be easier on the shooter while being nearly as effective:
http://www.buffalobore.com/index.php?l=product_detail&p=110
http://www.winchester.com/Products/...r-x/lead-semi-wad-cutter-hp/Pages/X38SPD.aspx
The main drawback to .38 Special, in my view, is that affordable practice ammo is not going to feel quite the same, in terms of recoil and blast, as the optimum defensive loads. For some that's alright, but for the recoil-sensitive there are still more options, including using the good old light-recoiling 148 grain lead wadcutter for both practice (non-match-grade loads for affordability) and self-defense (won't expand but should slice a nice deep wound channel).
As for barrel length, for me it's 4" or longer for home/range use and if you can carry a relatively long, somewhat large revolver, 3" for both carry (if you can) and home/range use, and a snubby only if you intend to carry it and cannot carry a longer one.