3 months old is way too young to expect him to sleep through the night. IMO that's ridiculous. If you're not opposed to the CIO method, please note that many pedis suggest not even thinking about starting it until 6 months.
The No Cry Sleep Solution by Elizabeth Pantley is an excellent book on getting them to sleep using gentle, effective methods if you're consistent. But again, 3 months is WAY too young for you to be worrying about STTN. Some babies do, don't get me wrong. Both of mine started STTN at about 2 months....and then stopped at 3.5!!!! At around 4 months babies start noticing more about their world and wake more often at night. It's totally normal. i would really suggest not pushing this, as he's still a very little baby.
I can't tell you about the swaddling. We continued to swaddle until my daughter was 6 months - it's what helped her sleep (and it sounds like your son sleeps better that way, too). I can understand you not wanting him to sleep on his face, though. Good luck with that. But really, I would keep him swaddled...it sounds like he needs it, and most babies do better that way.
***ETA I just read other responses, and please note that, except in cases of severe reflux, pedis and experts alike agree that cereal should NEVER be fed from a bottle. I am an advocate on delaying solids, but even if you are ready to give cereal at 4 months (like many many mothers do), do NOT give it in a bottle. Experts agree that this is not good. It's also a myth that it will keep them sleeping longer at night. Though there are people that swear that starting solids helped their baby STTN, most medical research backs up that it is a myth. Swaddling is going to help you a lot more than "cereal in a bottle" will.