Hey Gina,
I looked into the keywords that you mentioned that you are tracking ( "web design Santa Barbara" & "Santa Barbara web design") and I am not seeing your site anywhere in the top 50 results when I manually check in an incognito window, except in the ppc section. In regard to the keyword containing "in" we only show results for exact matches for the keywords that you are tracking, so we wouldn't include the results for that keyword in the rankings we show. Here are screenshots of the top 50 results for the two keywords that you are tracking where I did a search on the page for your site and only found it in the ppc section:
web design Santa Barbara:
http://screencast.com/t/kQlxP0I5
Santa Barbara web design:
http://screencast.com/t/nt8RKJhroC
It does look like the manual searches I did match with what our tool is showing, so investigated a little bit deeper into how Google calculates the average position metric and it looks like they include the personalized results, which we do not. Our tool shows what most users would see when doing a search for the keyword and, since you are viewing the average position section while signed into your account, that could certainly add bias to the position GA is showing. Here is a forum post from stackexchange.com that talks more about that metric: http://webmasters.stackexchange.com/questions/826/what-does-avg-position-from-google-webmaster-really-mean
I hope this helps. Please let me know if you have any other questions.
-Chiaryn
