I got this to work:
wp_list_bookmarks("title_before=<h3>&title_after=</h3>&category_before=&category_after);
The trick is to pass some null values (just pass the paramater, no equal sign) for category_before and category_after. To use h3 instead of h2, use the title_before param.
I know this original post was a little old, but I was just now looking for this very solution. Hope it helps someone…
