Earthdawn has been published four times, by three different companies. It was originally published by FASA, and then the license somehow got into the hands of both Living Room Games and RedBrick Limited. LRG made their changes to the game and published the "2nd edition," which you'd be familiar with. RedBrick focused on reorganising and editing the original material, releasing their version as "Earthdawn Classic", then on expanding the line with setting supplements.

That was the state of affairs until recently—two companies with two similar but not-quite-compatible games both called "Earthdawn", and players of Earthdawn divided among the original game, the mostly-compatible Classic RedBrick edition, and the updated LRG 2nd edition.

Now, the third edition's place in that context might be enough to answer your question for you. The 3rd edition is produced by RedBrick (published through Mongoose), and is RedBrick's idea of how Classic should be improved to make for a better play experience. As such, the 3rd edition is unrelated to and doesn't build on the heritage of Living Room Games' 2nd edition, which is what you're playing. It's a separate evolutionary branch, so to speak. In terms of "steps of improvement" from the FASA edition, 2nd edition and 3rd edition are the same number of steps away from FASA Earthdawn, but in somewhat different directions. Which one to play is then a matter of personal preference.

The editions, in chronological order, are:

1. Earthdawn (1st edition), FASA, 1993
2. Earthdawn 2nd edition, Living Room Games, 2001
3. Earthdawn Classic, RedBrick, 2005
4. Earthdawn 3rd edition, RedBrick/Mongoose, 2009

The changes in 3rd edition compared to 2nd edition haven't been itemised anywhere (that I know of) because they're two different companies' vision of what original FASA Earthdawn could become. However, there was an article by a RedBrick employee about the differences between Classic/original and 3rd. Annoyingly, the article is now lost in a site reorganisation, but some of the relevant points were preserved in a quote in this RPG Site thread on Earthdawn edition differences.

Answer in First Part

System Title

All editions are known as Warhammer Fantasy Roleplay. The first edition, hereafter 1E, is often seen using a separator is logos for "Role•Play". Online resources will often make the distinction for you with numerical notations.

Online 1E CharGen and resources

While I'm unsure of online 1E character generators, 1E was released in 1986 and rereleased by Hogshead at the very cusp of online resources like the WWW, they may be tough to find, and when found, horribly written by today's web standards.

Consider joining the Strike-to-Stun forums for 1E if seeking a deeper availability of resources.

Also, MadAlfred's WFRP Pages contains some of the richest resources for 1E still online (including two 1E conversions of Druidic and Elemental magic for 2E.)

Answer in Second Part

WFRP 2E, or second edition, was released, in 2005. It is almost fully compatible with 1E with the following distinctions:

Character Builds

Gone is the 1E assumed compatibility with Warhammer Fantasy Battle. All stats are computed on a percentile system. However, the compatibility between 1E and 2E is an easily managed task.

Other mechanical changes address odd "munchkin" builds of dwarf PCs, e.g., the aforementioned "Naked Dwarf" problem.

Career Changes

The central feature of WFRP 1E, the Career System, largely remains intact in 2E, except in Magical (Arcane) and Clerical (Divine) career paths...

Magic System Overhaul

Gone are is the tiered levels of arcane and divine magic careers. These careers are aligned mechanically with all other careers in the system.

The new magic system use the unified target number mechanic, ties well with the skill and talent system throughout, provides for dramatic grim failure, and reagents.

Canon Changes

1E is set during a rising tide of Chaos incursions and plots by Ruinous Powers. Ostensibly, 2E is set following the Storm of Chaos, a Warhammer world event that was played out around the world by Warhammer Fantasy Battle players, that also dovetails with the conclusion of original The Enemy Within campaign.

Conversion from 1E to 2E resources

Finally, Liber Fanatica has rich, downloadable conversion and support information for 1E-to-2E conversion. LF's Volume 1, The Character Compendium was compiled by play-testers of 2E and contains details on converting your 1E PCs to 2E.

These conversion tools would be very helpful if you wanted to say chargen using the 1E ruleset on hand and purchase 2E material at a later date.

Availibility of WFRP 2E

Almost all 2E material is now available for purchase at DriveThru RPG as PDF (and some titles as Print-on-Demand).

Hope this helps... 1E resources are out there, but show their age (if not in web design alone; remember 1E was released in 1986 and Al Gore didn't invent the internet until at least 1992--at least that's when he co-sponsored public access to ARPANET in the US Congress).

I've never encountered a character generator that wasn't hit by a "Cease & Desist" letter from GW. All of the ones I've seen have been removed from the net.

In general, all you need to look at is the publisher. If it was Games Workshop, Citadel, Hogshead Productions, or Warpstone Magazine (to issue 22), it's for 1E.

If the publisher is Black Industries or Fantasy Flight Games, it's not for 1E.

WFRP 2E setting materials can be converted with only minor difficulties, but character and monster conversions may result in some odd issues.

WFRP 3E materials are mechanically totally incompatible