I hear there's new units out now, version 4b? Is the latest and greatest hardware preferable?
Yes. Running Bitcoin Core would take a significant amount of ram, if you decide to have more peers.
What I'd like to know is what pieces of kit do I need specifically?
1. RP version?
The newest RPi offers significant improvement over the previous versions in terms of ethernet speed, CPU and memory speed/space. The similar pricing would just make it a no-brainer to go for the newer version.
2. Heat sink, fan?
Passive cooling would be enough, if you choose to run it without much load. The heat sinks are relatively cheap and it wouldn't be a bad idea to get one if you plan to run it for long periods of time.
3. what case?
That's up to you. A plastic one would do, just make sure it is compatible with your heat sink.
3. memory card 256gb I think. What brand/speed is best?
256GB would be an overkill. I wouldn't recommend storing the blockchain on an SD card since the size would only increase from now unless you plan to prune it. Even if thats a non-factor, the heavy read/write cycles could potentially shorten the lifespan of your card.
4. External Hard drive. (Is a hard drive necessary, can I use a thumb drive instead to boot and run from?)
IIRC, it is possible to use a thumbdrive to boot but a simple 16GB sd card would be enough. I would recommend you to get an old HDD to store the data directory in. It would be much cheaper than a huge sd/thumbdrive and it would last a lot longer. You might need to get external power to it though.
You should pre-sync the blockchain on a desktop computer first. The synchronization time for an under-powered device like the raspberry pi would be insanely long. It would be better for you to just copy the data directory from an already synchronized full node to your raspberry pi storage.