Read this thread, there's lots of good stuff/ideas in it...
http://forum.rpg.net/showthread.php?t=361200
Personally, you should just can 3.5 and run Pathfinder.
--
http://paizo.com/store/games/rolepla.../pathfinderRPG (The alpha version is free) 3.5 may not be the problem, you just need to jazz it up a bit to keep it fun?
If you want a good system that lets you "pick your powers" just use the Hero system --
http://www.herogames.com/home.htm I've played "DND" characters using the Hero system to great effect.