Ok so basically this will allow type II cards( smaller) to fit into type III housings and utilize higher clocks ?
I think the idea is a bit better than that even. I think that by default all Type II cards must adhere/support the 5W upper thermal limit. However, even in a Type II slot the card may negotiate with a housing and if the housing can support heat removal from the card to allow it to operate at a higher (10W?) limit, then the card may then utilize a faster clock rate or activate more cores (at that point).
Also from my understanding the type III card will be the physical form factor used for the EOMA 200 standard ?
No, I think this is a misunderstanding. I'm pretty sure that the EOMA-200 standard will have 202 pins Please see the following page for details:
http://elinux.org/Embedded_Open_Modular_Architecture/EOMA-200