What was his last appearance in the 3rd Season itself?

The last episode he filmed before his death was "Cheerio, Cheers." However, there was an outtake from a previous episode featuring Nicholas Colasanto used as the opening teaser to the season finale, "Rescue Me." That episode was filmed after his passing.

what year wad that from

I saw Rescue Me just this morning, its always so sad to see his last scene. I like how they cut out the laughter on his last line and just went straight into the song. I'm guessing when that ep originally aired the whole audience already knew the actor had died. :(

Despite what I have read elsewhere, I believe that the last episode Nick Colasanto worked on was "The Mail Goes To Jail'" and not "Cheerio, Cheers." Remember that episodes were filmed out of sequence to try to camouflage Shelley Long's pregnancy. In "The Mail Goes To Jail" she is definitely more pregnant, and bundled up, and then hidden in the heating duct. Plus, you don't have to watch Nick or his performance all that closely to perceive that his condition is much worse, in his physical appearance, the way he moves and the way he delivers his lines (at times, he seems to read his dialogue from atop the bar just before he says a line).

TV.com has episode production numbers for Cheers if that tells you anything.

http://www.tv.com/cheers/show/66/episode_listings.html?season=3&tag=nav_bar;3

And I remember hearing that in the final episode, when Sam straightens the picture of the Indian on the wall (forget what his name was supposed to be), it was meant to be a tribute to Nick. True?

The picture of Geronimo hung in Nick Colasanto's dressing room. As explained in the 200th episode special, it was hung on the upstage wall near the player piano after his death as a tribute to him. As to why Sam straightened the picture just before the end of the final episode, while I have never seen an official explanation, it is generally accepted that what you wrote is the exact reason: to acknowledge Nick as the series was about to end.

Nick Colasanto's last episode was really "Cheerio Cheers" cuz they did a teaser and cut the laughter out after his death in 85.