Looks like this isn't just an iBooks 3 issue. See this thread. It may be related to iOS 6 or just a long standing bug when the 'Speak Selection' option is enabled in Accessibility. Apparently you can "fix" it by doing the following:
1) Go to Settings > General > Accessibility >Speak Selection
2) Turn Off 'Speak Selection'
That will ensure you get the full menu in iBooks when you make a selction, but doesn;t really address the bug because now you can use iOS's 'Speak Selection' feature in iBooks. Hopefully Apple will address this bug at some point.