What is the difference in the 327 and 357 bullets?
The obvious stuff - the .357 is larger and most loads are quite a bit heavier than what is being used for .327 (say 158gr vs 100gr for example).
Which is the more powerful round?
.357, although if you are looking at energy the .327 can be pretty close since they can run pretty fast.
I'm leaning towards the 357 simply because I would also be able to shoot .38's.
I would too since you can find ammo everywhere for it. The real advantage to the .327 is that the SP101 comes in 6-shot rather than 5-shot; that's really the only plus I can see.
What is the advantage of 2 inch barrel over a 3 incher? or vice versa?
Bullets coming out of the 3inch will be slightly faster, but I think the real advantage there is the longer sight radius. The 2inch will carry better,of course.
Bobbed hammer or not?
Bobbed hammer won't catch on your clothes if you draw from a concealed holster, but you give up single action shooting. For a self defense gun I would go with the bobbed since single action isn't useful in defensive situations anyways.
I realize that either model I choose would require IWB carry as these guns are simply too big and heavy to pocket carry. Any suggestions for IWB holsters for the SP-101?
Simply Rugged Pancake or Silver Dollar Pancake can be made IWB with the extra straps they sell. FIST makes some seriously thin kydex holsters, too. There are may more but those are what I have experience with.