Player 3's hand may be dead, or may not be dead, it depends entirely on the casino/cardclub. I have never been in any casino/card club, worked at or played in that has had this rule but please note there 100% are cardrooms and casinos that will consider the hand dead.
In the casinos/cardrooms that won't kill the hand, the player will have to play with their hand face-up due to their blunder, they may even get a penalty depending on some card rooms rulings, especially if it could be shown to be or considered as an angle.
Like in pretty much any circumstantial situation of poker, especially with regards to rulings, it really depends on how it happened, why it happened, the venue's rulings, and or even the floor persons decision on the day. In the cases of home games, if it was a genuine mistake I would argue to cut the person some slack and continue the game.