Email Ty and ask him.
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I emailed Ty and he responded immediately. This is what he said:
"The switch in the up position is the normal position and the down position engages a filter that takes the 600-1200hz range down about 3 db. This was designed to make them easier to listen to at louder levels. Just make sure they're in the same position or the imaging will be off."
This is amazing customer service for someone who isn't really a customer. I told Ty that I bought them used off Audiogon (not from Ty) and he still treated me like a paying customer!!!
I'd been listening to them in the down position ever since I bought them because that's how they were when I got them and they sounded great as they were. I've since switched them to the up or "normal" position and I'm enjoying the results: a slightly more upfront midrange.