A 3qt tank is plenty large enough.
The system works by taking oil from the tank into the oil pump, pumping it up to 40-60psi to lubricate the engine. The oil does its work and then drips/runs/dribbles to the bottom of the engine sump. From there another "scavenger" oil pump sends it back to the tank. The scavenger pump is about twice the size of the pressure pump... if the tank drains down into the sump while sitting, that pump can drain the sump and refill the tank long before there's any engine damage from lack of oil.
What your engine builder is saying is BS. But like the others, I wonder what happened with your motor? It smells like this guy is trying to blame some engine damage (probably his fault) on your choice of oil tank.