Is it OK to squat 3 times a week
Usually a novice or intermediate can do it because the weights they are using do not need a lot of recovery time. Hitting your body with say #225 xsets of 5's for a few sets takes much less energy than say #405 setsx5's. Also as was mentioned, you could do a med light heavy or some such. The bottom line will be your recovery. If you are recovering from it, and weight is climbing, sure. If you get to a point where you begin to regress on 3x, and the weight starts getting heavy, then dropping back to 2 days per can work.
It is hard to do it for long periods if you keep pushing, but 2x-3x times per week work like this, can build a bigger work capacity base and the volume used helps build foundation mass.
I know some guys don't squat and dead in the same W/O either, but some do varying intensity on either thru the week.
As far as leg size, again if you are getting stronger, you will eventually add mass and slowly might be better. Remember too, that about #5-#7 pounds of muscle gain in 6 months to a year is actually good.
Another question might also be dependent on how deep you are squatting to elicit more fibers!?