You're right that the best way to think of it is not "The third round is the hardest," but rather "The last round is hardest." As you mentioned, Marshall's MBA.PM program actually uses a rolling a rolling admissions calendar. This is taken right from their web site
:USC Marshall MBA.PM uses a rolling admissions process: we evaluate complete applications in order of their receipt. Therefore, it is beneficial to submit your application early. Our application will open on October 1, 2009, and will remain open until May 1, 2010
So, you're not forced to choose a specific date. I think your instincts are correct: You should plan on taking the GMAT again and trying to get up around 700 (like you had been doing on the practice tests), to offset that relatively low GPA (3.1). You don't want to wait until May 1, but waiting a few more weeks is smart, assuming that you get a better score.
BTW, if you're looking for more GMAT practice, Veritas Prep
offers a really good free practice test here:http://www.veritasprep.com/gmat-prepara ... tice-GMAT/
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