Joe Inman and Lonnie Nielsen share third place after matching rounds of 1-under 71. The duo stands at 5-under-par 211, with Fred Gibson and Rafael Navarro one stroke further back.
McNulty, a 16-time winner on the European Tour, began the day at 6 under, but dropped a stroke at the second. He rebounded to convert four birdies over his next six holes to make the turn at 9 under.
He managed two birdies and two bogeys on the back side at TPC at Eagle Trace to maintain the lead.
'Today we got an opposite wind to what we've had on any of the other days and the course was quite difficult as a result,' said McNulty. 'There was more water in play on these holes, but I managed to putt nicely again and that always helps.'
James, a winner of 18 European PGA Tour events, had three birdies and a bogey over his first 11 holes. However, he bogeyed the 16th to drop from a share of the lead.
After Friday's final round, the top seven players will receive full exemptions into all open co-sponsored events on the 2004 Champions Tour schedule.
Sam Torrance, the 2002 European Ryder Cup team captain, and Hajime Meshiai share the seventh and final spot at 3-under-par 213. Greg Edwards is one stroke further back at minus-2.
After the top-seven receiving full exemptions, the next eight players and ties all receive conditional status on the Champions Tour for 2004 based on their order of finish.
Luis Carbonetti, R.W. Eaks, Keith Fergus, Darrell Kestner, Jack Spradlin and Mike Zaremba are tied for 10th place at 1-under-par 215.
First-round leader Terry Gale is on the outside looking in right now as he stands at even-par 216. He is joined there by Champions regulars Jay Overton and John Schroeder, as well as seven other players.