We are looking at using XNA 3.0 for a puzzle multi-player game we are looking to develop. We want to make for ONLY PC and want to know if you can use XNA 3.0 Royalty Free if intended for Commercial Publishing (again for PC ONLY). Any downside to using XNA 3.0 for PC Only game?

The answer to this question can be found in the XNA site FAQ (no one ever bothers to read them) XNA FAQ and also in the EULA which explains what you can and can not do in regard to commercial exploitation.

In V2 this was found at ($Program Files)\Microsoft XNA\XNA Game Studio\v2.0\EULA.txt. I assume that for V3 it will be in a similar location.

For future advice on exactly what you can/can't do the best place to ask would be the XNA forum at http://forums.xna.com/forums/. In fact there is a thread there asking (and answering) this very question.