I say go with the 3.5 HP. While I imagine that one is more expensive, sometimes the lower horsepower ones seem to have a harder time picking up everything. I currently have a 12 gallon 5 HP and a 5 gallon 5 HP, and they both do well on picking up the stuff, though the smaller one has a smaller hose, and of course that creates problems. Point being. I used to have one that was 2.5 horsepower and I felt it just didn't have very much suction to it. It was also a much smaller vac though, only 2.5-3 gallons or something, but it would sometimes have a hard time picking up stuff. I'd personally go with the larger HP just to be on the safe side.
About the hose getting clogged - I have not had any luck with shop vacs that are actually "Shop Vac" brand. They've been, IMO, worthless pieces of crud that aren't worth the money, and don't last any length of time. The large one we have is by Rigid (LOVE it, rarely rarely clogs, still works good going on 8 years) and the smaller one is by Stanley (like it, it's ok, but would have a second Rigid if that one wasn't for the apartment). I can't say I'm super-fond of the Stanley one, because of the way the hose empties into the container (hard to describe, but the dirt has to turn at a 90 degree angle from the hose to the container, so anything larger than, say, a quarter, gets stuck).
The biggest thing you need to think about, though, with things getting stuck is hose size. Part of the reason we're never trying to de-clog the hose on the Rigid is because (I don't have it here with me, but...) it's probably a 2" or 2.5" hose. Versus some of the smaller vacs that have a 1" or 1.5" hose. I'd try to get the largest hose you can that will fit your vac.
