If I have the max number of failed attempts set at 3 on a recurring billing profile will the status automatically change to CancelledProfile or SuspendedProfile when the payment fails 3 times?
Actually, PayPal's system seems to ignore that parameter altogether and follows the same practice no matter what.
If a recurring payment fails it will re-try in 5 days. It will do this 3 times, and if it fails that last time it will indeed suspend the profile at that time.
It always does 3 attempts regardless of what you set the max number of failed attempts to in my experience. If you have IPN configured you'll receive IPNs at each attempt and for the suspended profile.