The grinding will be the teeth of the splines of 3rd gear and the hub sleeve crashing together, most likely due to the fact 3rd gears synchro ring has worn down and no longer bringing 3rd gear up to speed before the teeth of the splines are engaged.
Jumping out of gear is likely a result of excessive wear of the spline teeth from them crashing together and so they no longer engage properly, although it could also be caused by a worn shift fork or worn selector mechanism.
You would ideally need to pull the box apart to identify the true cause, but I would expect the 3rd drive gear, synchro ring and hub sleeve will need replacing to rectify the problem. Considering the likely cost of the parts, picking up a good used transmission could be a better option than trying to repair what you've already got.