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From a friend who has done a lot of work on Pri, he says the 2nd gen is the way to go. Its more reliable and doesn't sacrifice much in the way of MPG. It is smaller though I believe. The 3rd gen got a good cost reduction done to it and has seen some issues. So, if you're looking for reliable I'd stick with the 2nd gen and find one with low miles. My 04 is right around 140k and still going strong with only a burned out LED tail light (which did require replacing the whole assembly). I wouldn't be too hesitant to find a 3rd gen though. I doubt they have THAT many issues.
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