I've hung jalapeños for 3 weeks. They are soft and have turned red. Can I blend them at this point to make a hot sauce?

Definitely can blend them (with a little vinegar, salt and maybe sugar) for a hot sauce. If you leave any hanging, they will eventually dry out and store very well. If you want to eventually have chipotle chiles, hang them near something smoking (like an outdoor grill or campfire) then let them dry totally. You can also freeze them whole at any point. I've done all but the smoke option and have had success.