When Muddy recorded "I'm Ready" the story is that Walter played it in third position (I seem to remember that this was either on a chromatic or a Koch - without using the button). He used 90% draw notes and his solo consisted of sliding down from top of the harp to around the 4 hole. Muddy made the comment after the song was over: "Practice on your own time!" but changed his mind later when he heard the take. This may, or may not, be true, but from that time on, third position or "slant" harp became a very cool thing.
Go see Cary Bell or Paul Delay, or listen to William Clarke or George Smith if you remain unconvinced. Third position, in addition to being way cool, is you lead-in to playing with the big axe - the chromatic. You can't play cross harp on chromatic because the layout is different from the bottom end of the diatonic and the little flap things keep you from bending the notes easily. But Third position is quite natural and the couple of bent notes that you need are only button press away.
Since my own chromatic was stolen 5 years ago and I never bought another one (I'm too cheap), this discussion will be about playing third position on a diatonic harp.
The I note.
In third position, the I note is the 1 draw, 4 draw and the 8 draw. The I chord is the draw notes. The 8 draw is higher than we are used to going, but in third position the 8 hole draw becomes a good note to resolve to and opens up the higher end notes.
In cross the I note was the 2 hole draw, but in third position the 4 hole draw is the same note. One way you can think about third position is that it is the same as cross, only moved up the harp two holes. Your cross harp breathing patterns can be translated up the harp without much change.
The flat III is the big difference between cross and third. In third position the III is the 2 hole double bend (a good hole in straight cross and third position) 5 hole draw and the 9 hole draw. The natural III lives in the 2 hole as the first bend. So the flat III is out in the open on the draw notes and gives third position its distinctly minor sound. You can't play a major chord and to play major blues, you have to play the first bend in the 2 hole which is not such an easy note to hit accurately.
The Flat VII.
The flat VII is the 4 blow. It is no longer a draw note. Your breathing patterns for playing third position will try to resolve you to a 2 draw or 3 blow which is the IV and a stinky note while in the I chord. You have to try to learn to end up on the 4 draw or 4 blow. Remember, try to play the same patterns only 2 holes higher.
The IV, V flat V
The IV is 2 draw and 3 blow and 6 blow. In third position, this is a bad note to play in the I chord, but you need it for a IV chord.
The V is the 6 draw. This is not a powerful note and makes the turn around a little rough in third position. Instead of playing this, play as though you are in the I chord (draw notes). The flatted V is a bend in the 3 hole, but don't go there just to play the flat V, you'll never hit it right. Learn instead to go from the 2 hole double draw to a the 3 hole bent all the way and then let it slide up a half step. The IV and V chords are not present as chords so fake it by playing the I chord all the way through the turn around.
As a rule of thumb, play the draw notes from 4 up and play riffs as though you were in cross harp, 2 holes down. They won't sound the same, but they'll sound good. The 1-3 holes can be drawn, but won't give you a "Juke" type run. To add a more blues-like feel, practice this run up through the 1 to 4 holes.
1 draw - the I note.
2 draw double bend - the flat III.
3 draw bent all the way, sliding up a half step - the Flat V and V
4 hole draw - back to the I note.
This is sort of the third position equivalent to the Juke riff.