Does it matter where You place Characters in the Party? Will get the Chars on Place 1-3 more likely attacked by Enemies?

Yes to the first question, no to the second.

When you bash a wall (to look for a secret passage, or break open a door), your first two characters will be the ones who take damage, and I believe will be the ones whose Strength score is ckecked.

In at least one MM4 dungeon, there are pits that, if you're not levitating, will damage the first 2 party members.

In many situations, obtained items will go to the first party member who has a free inventory slot (of the right type, for Xeen).

I *think* that party order is also used to resolve Speed ties, with characters toward the front going first in the event of a tie.

Enemy targeting, on the other hand, does not take into account position. It works as follows:
* Some enemies target your entire party at once. (This includes unconscious party members, who can be killed if you're not careful.)
* Some enemies will target a character of a specific race or class, as long as they're conscious (and I believe not petrified).
* Otherwise, the enemy targets a conscious character at random.
* I have not tested to see what happens if an enemy that doesn't target the whole party tries to attack when there are no conscious party members. (Such a situation can happen if you dismiss the last conscious party member.)

I also have a question related to battle formation:

Can the monsters that you don't see that are right behind you or beside you attack you from behind or from the side
while you're already in a battle ?
(In the Eye of the Beholder games, they do)

I believe they can. However, the game's notion of whether the enemies see you is a bit odd, and definitely exploitable:
* For an enemy to see you, you need to see the enemy. So, if you never look the enemy's way, the enemy won't see you and therefore won't attack.
* Whether the enemy sees you isn't saved. So, before entering melee combat, if you turn away, save, and reload, the enemy will forget that you're there.
* Be careful, as I believe the game doesn't save enemy current HP.

Ok. I guess that is why they don't permit you to turn right/left (or use any movement keys) inside a battle, LOL.

In EOB games, the battle formation DOES matter and is similar to MM1/MM2. You can access the movement arrow keys at all times, BUT enemies see you at all times no matter which way you see, so they will hit your mages from the side or behind, and they do. But EOB is fully real time, not turn based, I don't know how MM3-4-5 could have implemented it while being still fully turn based.

MM3-5 could have implemented things while being turn based; just run through each of the enemies each turn, check to see if the enemies see the player, and then have them respond. After every round of attacks, just have every enemy get a move, not just those in front.

The Quest is an example of a game that does this, albeit there's only one party member, so no formation mechanic.

As for restricting things inside battle, why doesn't the game allow you to load a save during combat? I understand not allowing saving (particularly with enemy health not being saved), but what's the problem with loading? As is, if I'm in a battle that's basically hopeless, and I don't want to (or can't) run away or cast Time Distortion, I have to use Mr. Wizard, and *then* run away. (At least the Gods of Game Restoration haven't deemed any areas of Xeen off limits, to my knowledge.)

One other note: On Darkside, there is a chest which requires a password -- a character with the thievery needs to be in spot 1.

LOL
Perhaps they were inspired by the dubious placement of some urinals in public mens restrooms.
(the kind with varying heights... )

I suppose that's not quite as bad as MM2's bizarre gendered physical immunity mechanic (made worse by the fact that, in the default party, the only female characters are the ones who can use magic to get around it anyway, and how most of the MM2 hirelings are male; I may have sometimes complained about gender balance in games, but in MM2 it actually matters because of this bizarre mechanic).

MM3 has one quest that's almost impossible to do without a male party member (though I believe a hireling will work here), but at least I don't remember that quest being required or important. Fortunately, this doesn't come up in the Xeen games.

LOL I remember that now that you mention it! I think I took to calling it the "ravenous bugblatter beast of Traal" rule.

ssjlee's MM3 FAQ says this:

[i] PARTY ORDER
The manual mentions this, but it bears repeating: characters farther to the
right in the marching order get a bonus to armor class. You should therefore
arrange your party in ascending order of squishiness from left to right.
[/i]

I did not see this info anywhere or in any of the manuals so I'm very skeptical of this claim.

Worth noting that, even if this turns out to be true, that AC isn't that useful in this game. Sure, it helps against physical attacks, but not every enemy uses physical attacks. For example, in Vertigo every enemy uses only poison, and the most dangerous enemies (except for Dragon Mummies, who only target Clerics if possible) use Energy. (Pretty much everything in the Dungeon of Death that you need to worry about uses Energy; I'm thinking about the 2 enemies in particular that can eradicate at range.) It does matter against Minotaurs and Gorgons, but that's only one dungeon. (Why do Gorgons look like Minotaurs in this game?)

Even if there is an AC bonus, it's likely smaller than what you can get from a single piece of Obsidian, a cast of Bless at a decent level, or one of the better AC fountains.