Going from 3 to 2 exemptions will increase your Federal withholding by about $31. This is approximate because different employers calculate w/h differently, but will generally be within $5 one way or the other. On a 26 pay period year that difference amounts to about $800.
I took the liberty of estimating your tax liability for a full year of employment. Assuming you earn gross annual taxable wages of $57,980 (i.e. $2,230*26) and assuming you will take the standard deduction for 2005 of $7,300 and personal exemptions of $6,400 (2*$3,200), you will have taxable income of $44,280. The head of household schedules indicate your initial Federal tax liability will be about $6,600. Assuming you are eligible for the child tax credit (i.e. $1,000), that liability will be reduced to about $5,600. Your Federal withholding with 3 exemptions should be about $315 ($346 with 2 exemptions) per pay period for an annual total of about $8,190 ($8,990 if 2 exemptions). Thus, you appear to be in line for a significant refund assuming you have no other taxable income.
If I were you I would consider at a minimum, maintaining your exemptions at three. You might even consider upping the exemptions to 5 which would result in Federal withholding of about $253 per pay period for an annual total of $6,590, which is still $1,000 above your projected liability. Also, you may be eligible for the dependent care credit if you pay for child care so you can work. See form 2441 at http://www.irs.gov/pub/irs-pdf/f2441.pdf. If you paid at least $3,000 for child care (and you were not reimbursed by your employer or otherwise received Sec. 1125 benefits) you may be eligible for an additional $600 credit.
I also suggest you fill out a W-4 (http://www.irs.gov/pub/irs-pdf/fw4.pdf). Filled out properly you will see that you are entitled to 5 personal allowances (i.e. 1 for yourself; 1 for being single with 1 job; 1 for your dependent; 1 for filing as HOH; 1 for the child tax credit).
Because it is impossible for me to identify and consider ALL the relevant facts, this advice is not intended or written to be used for the purpose of avoiding penalties, and cannot be used for that purpose.