Sorry to deliver bad news, but you are waisting your 2nd and 3rd choices.  Preference points are only used and only count for the 1st choice draw.  In order to have a chance at drawing a license on your 2nd and 3rd choices, there have to be licenses left over after everyone who applied for that license as a 1st choice has to get a license.  Therefore, if you choose a license that requires any preference points for your 2nd and 3rd choices, you do not have a chance of drawing that license.  After the 1st choice licenses are distributed, the 2nd and 3rd choice license distributions are supposed to be entirely random.  If you look at your Big Game Brochure, licenses will have a "*" after Sex that were available as leftovers after last years draw.  This is a good place to start to figure out your strategy for your second and third choices.  Also, you can dig a littler further in the Statistics on the CDOW website to get a better idea of your chances of getting one of those licenses on your 2nd or 3rd choice.

I think I got this mostly right, and if I messed something up, I am sure we can count on someone to correct me. 

Everything he said sounds exactley right. The only thing I can add but does not affect preference points itself is to not forget that with the new hybrid system in some of the high demand units that require 10 or more points, after the 5 points that you mentioned you do have a chance of drawing. Even if it takes 13 points like you said a few people can draw with far less.

Theunits that qualify are on page 4 of the new book.