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My question for WA is if a site is ranking already in #2 or #3 why would optimizing for the top 10 be useful? Should not this site be only optimizing for sites higher in rank than itself and by including sites lower in page op rank could that not pull that site down?

Yes, in such cases optimization basing on the average values of the top 10 competitors would not be useful if not harmful. This way you would be using the average density of sites ranking lower than yours as standard one and you might reduce your overall optimization value although the score will.
In fact you do not really need to change anything in terms of onpage optimization for pages ranking so high already. Most probably you need to concentrate on getting the backlinks that will bring you to #1.