You have a defender in the #1 bench position, a midfielder in the #2 slot, and a formation with 4 defenders. If a starting midfielder doesn't play, does the sub automatically become the #2 midfielder, or do you lose out with no substitution?
Good question and easy to answer. Yes. The system simply runs down your bench to find the 1st active sub that forms a legitimate formation. And yes, you've spotted the one weakness in the system, if all your defenders play, then you can never use your '5th' defender. The game should really have a 5 defender option.