It certainly is messy and I think having pre-orders like #17xx is confusing people, and I can't see how a 1-500 could have one that high.

From what I've read, they said they would match up pre-orders with email addresses so you retain your place in the queue

The pre-order number is the highest you will be, any numbers below you that don't pay within 7 days move you up

So
If you have pre-order #100 and 50 people above you don't pay you move to #50
If you have pre-order #1700 and 500 people above you don't pay you move to #1200

If you haven't pre-ordered, then you go to the end of the queue, so if there are 1000 paid pre-orders paid you are #1001