Collada is a very convenient format to use during content creation because it's relitively easy to read(3DS is unreadible), its widely supported(much more than 3DS), its wel documented(3DS doesnt have official docs as far as i know) and it supports virtualy everything. And for content creation the size of the file does not matter. When youre model is done you should convert the collade file to an optimized binary file format.

ya. collada "should" not be used in the final production, but nothing prevents u from using it :P

if the models are relitively simple and its only meant for a flash game u will probely get away with it (only bad thing that might happen is a slightly bigger download and a fraction of a second more loading time on a smallish model)

using collada as your final format would defenetley be alot easier to implement than using 3DS if your writing all the loader code yourself (not sure if flash has build in code for this)

besides. The way youre going to store it in memory wont change regardles of your model file format so you can always add support for another model file format later

This is the nice thing about XML: it takes some data and transforms them in much more data. MUCH more :-)

Anyway, Collada is meant to share contents between different applications, and though I never used it, I was told it is good for this task.

And please do not compare it with 3ds :-) 3ds is an old format with so many limitations that I was forced to move to other formats for my raytracer after having written a small 3ds loader (severe triangles count limit, just 1 UV set per surface IIIC, and more).