My 3 year old has a hydrocele in the groin that comes and goes dr said to monitor it for now? he had an ultrasound done. could it be mistaken for a lymph node?

No, those 2 are completely different under ultrasound. I agree with his pediatrician, watchful waiting is the right approach.

It is probably a communicating hydrocele where the sac surrounding the testicle still communicates with the abdomen. They generally close by themselves. Your doc's advice is sound. Lymph node is superficial and firm and a trained doc can easily recognize it.