I'll try to contribute without repeating what has been already said:
The biggest factor is the driver. No tires can compensate for a driver's lack of experience or bad choices made while driving.
Porsche Stability Management should help significantly. I haven't personally driven a 911 with PSM, but I have driven rear-wheel drive cars in the snow with such driver aids and they help significantly when you are trying to correct a loss of traction. Traction control will help a little bit, especially if one tire has more traction than the other while you are applying power, thus potentially causing a slide. But traction control is nowhere near as beneficial as having the car be able to detect slip on all four tires and adjust brake biases dynamically.
If you do plan on going this route, do yourself a favor and pick up a cheap, used set of Boxster S rims and put snow tires on those. The tires are narrower, so not only should they be cheaper, but you will have more weight concentrated on a smaller contact patch.
The beneficial characteristics of front-wheel drive in the snow carry over with respect to better traction when starting and accelerating, as the weight distribution due to the rear engine puts more weight over the drive wheels. However, less weight in the front means less weight over the wheels that are steering the car. Add to this the, for lack of a better word, twitchiness of the 996 once traction limits are exceeded, and it is difficult to recommend a C2 as a winter car unless the driver is not only experienced, but also experienced with the handling characteristics of a rear-engine car. I know I still have the ill advised tendency to let off the throttle and countersteer when the rear-end slips.
Everything said, you can get a beater car or truck for under $1,000 to drive in winter. I don't know what your insurance policy is, but for me that's half of my deductible. Even if Walter Röhrl asks you for driving advice, that doesn't make the other drivers on the road safe and competent. If you are unsure enough to be asking a forum, then there are probably worse investments than a throwaway car to use in adverse weather conditions. Just make sure to save $15 for a "My other car is a Porsche 911" license plate holder.
I am considering using the car all year round but dont want to spend the cash if its not going to be able to go up hills w/ 3 inches of snow on them...
I hate the phrasing on this, as not all three inches of snow are the same. Powder doesn't behave the same as packed snow, which doesn't behave the same as a light dusting of powder on top of a slippery sheet of ice, etc. I guess the real counter-question is how often do other drivers get into accidents in these weather conditions, and can you avoid driving when the roads are not yet maintained?
IMHO, a rear wheel drive with snow tires performs better in the snow than a four wheel drive with all seasons
It depends on the quality of the all-season tires, but in general, with the exception of stopping, no. The ability for the drive wheels to help pull the car in the intended direction facilitates both cornering and straight-line driving in low traction conditions, and the ability to have twice the drive wheels attempting to apply power on a start tends to outweigh a softer rubber compound when starting.