Okay, so as a D3 coach in Year 1, I went after a kid at the bottom of my D2 listings. Love him, but he started considering a human in D2, so I gave up.

Then, after a couple of cycles comes this:
"I'm not sure if you're still interested, but I'm definitely all ears. Give me a ring on my mobile - I'd like to talk about next season."

Does this mean he's truly interested in considering me? Should I risk some fairly limited money and pursue?

That just means he's recruitable directly now - you don't have to pull him down.  It doesn't mean he's especially interested in your school.  If you're willing to battle a D2 school for him, go ahead.  If not, don't.

If the D2 coach has more players on his considering list than he has available spots, you might have a chance.   But, for example, if he has 5 slots and is only considering 3 players, you won't have the money to battle him

yeah - all this means specifically is that he will start accepting your home visits and campus visits. It's still not the best move as a D3 school to ever battle a D2, unless you know you have some sort of advantage. 

I'm not sure I agree with that.  I mean obviously you have to be careful since on average that D2 school has 67% more cash per scholarship, but I've battled D2 schools a number of times and with a great deal of success with my D3 programs.  Obviously you need some kind of advantage - either distance, number of scholarships, or both - but I'll also occasionally do it if it looks like a player who might be a low priority for the D2 school.  Or if they're already battling for someone else.  Or if I think I can flood the guy right before signings or in the middle of the night and try to steal before they have a chance to retaliate.  Long story short, yes you have to be cautious, but D2 vs. D3 the prestige difference is small, the money difference is significant but not overwhelming, and I think most D3 coaches are FAR too nervous about battling D2s.