Every single one of you are right.
I personally think the writers or the creator specifically picked the name becuase the "Middle" had multiple meanings in relation to Malcolm's position, wither among his siblings or in the situations he get in.
Either that or they found out the multiple meanings afterward which just further confirmed that the name was a good one. I believe there are Movies, Books, and other TV shows with that same deal.
The proper linguistic term for a phase like "Malcolm in the Middle" is
Polysemy. (i did not know that term, I just knew a term existed for it. Thanks Google, lol)
"A word is judged to be polysemous if it has two senses of the word whose meanings are related." - Wikipedia