All I can say to help guide you in the right direction, is that with the HVAC on "MAX A/C" the air is being drawn in from the interior of the car where as all other options draw air in from the exterior of the car.
I'm thinking that if either your coolant temp is LOW and not getting HOT or your heater core is dirty and not transferring heat very well the heaters performance will be poor. so if the interior of the car is at all warmer than it is outside ambient air temp than the heat will work better.
I'd verify that the Coolant temp is up around 180-210deg F and if it is consider flushing the coolant system. You can use a non contact Infrared temp gun to check the temps of the Thermostat housing, Radiator and before you get it tore too far apart the heater core. If the heater core is noticeably cooler than the radiator than it's most likely dirty inside.
1986 SE 3800SC/4t65eHD (firstname.lastname@example.org) I'll Sell it if you like
1985 GT 3800SC (swap in progress)