Well... not really that good in an obvious sense - it doesn't have the ability to deal with floating points (non-integers) well, and most 3D engines are riddled with them. The fact that things like Quake and Yeti are running is a testament to how good the coders' skills are - especially those that wrote the FP optimizing routines in GCC 3.4.1 (not so with Yeti - first ver out well before 3.4.1, but certainly with Quake).
That said, however, there's a lot - in theory - you can do with it that is 3D. Its just more work. Possibly less, idd, these days due to the presense of Klimt, though no-one has yet used that library.
Think of the GP32's 3D skillz as probably roughly on a par with what you could do on a Pentium 100 with no additional gfx card. Maybe a Pentium 75. Probably. Not quite sure of a decent analogy, tbh, since there is so little 3D stuff - and especially since I'm pretty sure x86 chips have had FPUs since the better 486s, which makes comparrisson awkward.