Dredge's performance last week was his first top-five finish on The European Tour since 2010, and injury combined with a loss of form saw him lose his full playing privileges two years ago.
“It wasn’t my best ball striking round but it was a good scoring round, that’s for sure,” said Dredge. “I lost my card at the end of 2012 and had a few health problems to sort out.
“This year my category is quite low, so when I do play I've got to go out and play well. I'm sorting things out and hopefully it will soon be gone.
“Last week was huge for me. I didn’t win and I would have loved to have won but Marc [Warren] played fantastic in the last round I thought and handled himself really well and totally outplayed me. I didn’t play well enough.
“Still, I felt as though I played some good golf and I took a lot of confidence from it. I was hoping to bring it here with me this week and I have so far.”
The 38 year old Donaldson, looking to secure a Ryder Cup debut next month by earning €30,000 in Prague, opened with rounds of 66 and 69 to lead Gregory Bourdy by a shot on nine under par at the halfway stage.
The World Number 29 started round three in style, hitting a brilliant second shot to six feet at the par five opener and holing the eagle putt, before firing an iron to five feet at the fourth for another birdie.
Donaldson dropped a shot at the fifth after three-putting, but got it back with a birdie at the short seventh.
However, things started to unravel at the eighth, where the two-time European Tour winner missed the green to the right, failed to get his first pitch to the green from some thick rough and left his next chip six feet short, missing the putt to run up a double bogey.
Donaldson recovered a shot at the par five ninth and made light work of the long 12th too, but a bogey at the 13th saw him caught by Kjeldsen, who had got up-and-down from a green-side bunker at the 12th, and Dredge, who had a tap-in gain at the same hole.
Some fine approach play saw Dredge birdie the 14th and 15th to hit the front, and although he missed an eight foot putt at the last which would have seen the two-time European Tour winner equal the course record, Donaldson bogeyed the last to give him a two shot lead as the 41 year old seeks a first win since 2006.
“I've had no bogeys since the first day and it’s nice when you do that,” added Dredge. “All the birdies count then and I've been delighted with the last two rounds so if I can do that again tomorrow I would be over the moon.
“It’s nice to be up the top and contending again at this tournament, it’s what all of us guys practise for and I'm enjoying it so hopefully I can have a good round again tomorrow.
“I think I am a bit surprised by it, to be honest. Us golfers are quite simple people, we just try and think one shot at a time and do your best with that. Ultimately that is our goal, take the ball wherever it is and give it your best shot with each one.
“I do think I'm due a better ball-striking round because I don’t think I've played as well as I normally do this week, particularly off the tee, which is a key part of this golf course, but as I said I'm scoring well.
“I was in the scorers and there are two Welsh flags at the top so I don’t think that’s happened in a while!”
Kjeldsen and Donaldson hit rounds of 68 and 71 respectively, with France's Gregory Bourdy fourth on nine under par.
“It was there for my taking today and to extend the lead,” said Donaldson. “I played well enough to do that but I didn’t, too many sloppy mistakes but that’s golf. I’ve played a lot of golf recently.
“I'm not too fatigued. I probably will be when it’s finished but the adrenaline just keeps you going through the event if you’re doing well. I'm not too bad now.”
Kjeldsen's round threatened to come apart when he bogeyed the 15th, but a 25 foot putt for par helped the three-time European Tour winner preserve his place on the leaderboard.
“It was a nice combination of flawless golf and then a battling spirit in the last few holes so it was a nice mix,” said Kjeldsen, whose last title came five years ago.
“I'm loving it at the moment. I was out there with good guys again today we had a lot of fun. But playing well, you just can’t beat that.
“It’s great, I always enjoyed playing with Bradley, he’s always been a great player but he’s had a few injuries so nice to see him playing well and we’re enjoying it.
“It’s baby steps for me and this has been three good days for me and ill try and build on that and see where it takes me.”
Scotland's Stephen Gallacher, another player chasing a Ryder Cup spot, shot a one under 71 to sit in a share of fifth on eight under, but Joost Luiten is likely to need a big performance in Italy next week to qualify automatically after slipping down the leaderboard with a 73.