http://www.fourbyfourclub.com/W107HeadlightsAdjustmentKit.pdf

It makes sense that with the vacuum it would be in the raised position. Standard planning is to fail/default to a safer mode, so when you lose vacuum, the headlights would tilt down and not blind other drivers.

In position 0, the switch would be a bypass to full strength vacuum to the lights and the lights would be raised (level back end)

In 1 or 2, the switch would pass a little less vacuum and the lights would be tilted down or lowered (compensate for change in angle due to lowered rear).

And in position 3, the lights would go all the way down, which would dump the vacuum. I've read, and I think I recall from my old Audi euro light days, that position 3 was only recommended when towing a trailer. If the switch is connected to your shutoff line, this makes sense that you can't shut off your car in 3. There may be another small hole on the switch that is a vent. If so, block this hole (basically defeating the purpose of the switch) and see if you can shut off your car in position 3.

Or if you've got a vacuum gauge (Mity-Vac) put the gauge where the lights would be in your vacuum circuit and measure the strength of the vacuum in each position. I'd anticipate full vacuum at 0, a little less at 1 & 2, and none at 3.