I personally enjoy the grenades of Halo 3. They weren't good for killing a fully shielded enemy, but they were perfect for BR/Nade combos. If you heard a grenade coming, you should still escape completely unscathed, unlike in Reach. Also, the physics allowed 'nade bounces off the ground or wall in tight situations, which could quickly give the more talented or resourceful player the upper hand in battle.
The grenades in Reach, to me, failed not because of their radius or strength, but because of the decreased jump height and movement speed. It's simply too easy to chuck random 'nades and deal severe damage or pick up easy kills, and far too difficult to consistently dodge grenades without taking damage, regardless of skill level (note that I'm talking about without AA use). Furthermore, they don't seem to bounce off of most surfaces as they should. Frags are clunky to bounce, are thrown as though they're shot out of a gun, and stick to grass, wood, and other textures far too easily.