Position more closely refers to the fret number, it's it's not like "1st position is the first fret." It's hand positions. It's mainly used on classical stringed instruments, and not so much on guitar. Here's an example of the first few positions from the nut:
1/2 position - index finger on the first fret (or half step up from the nut)
1st position - index finger on the second fret (or a whole step up from the nut)
and I'm not entirely sure where it goes from there. I only have a passing understanding of it, from hearing people talk about it. What you're talking about, I think, is scale degree.
The thing about theory is, for some people it's awesome, for some, their ear is better. I mean, look at Jimi Hendrix. Sure, not the greatest guitarist ever to live, but he was bloody revolutionary and furthermore he wrote and played stuff that sounded good. He had no knowledge of theory, though. Now, for people like I, who's ears suck, I have to use theory. I don't use theory by just strictly going by it and not even caring what it sounds like. I use theory as my way of predicting what it will sound like. Eh, but nobody really cares about that, I'm just saying that I don't think not knowing theory will make you a poor musician.
edit: Aside from correcting his musical terminology, I think nescience's idea is a good one. Definitely learn the church modes, because it opens up a whole new way of playing.