Programs don't care how fare they go down the list as long as they match (unless they are the type of program that gloat about their rank list every year).
As for telling them what number you are ranking them, when I was doing my match it was illegal for them to ask you. I don't know if it has changed. Everyone was doing it anyway. You should not tell people that you are ranking them #1. That does not motivate a program to rank you higher.
It's still true...applicants cannot ask and programs can't ask either. They are however allowed to volunteer information. Hell, they can even put it in writing. But anything short of an actual contract is an informal agreement and shouldn't be seen as a guarantee.
I don't think people have to tell programs that they are going to rank them #1. You're right, unless they really want you, that does not motivate the program to rank you any higher. If they really want you, why should it make a difference?
I grappled with this when I applied. I was told "if you rank us #1, you will match here" by several programs. Sure, it feels good to hear it and all but I never took it as a guarantee. Actually, hearing this dropped one program down my list just a tad since I knew that program would be a "safety net" and I wouldn't go lower than that on Match Day. Regardless, this mental masturbation in my mind really didn't mean a thing...and ultimately, I knew it. Nonetheless, I never mentioned the words "number one" in any correspondences with programs, even my top choice program. I simply wrote a lengthy letter saying that my program is where I wanted to end up and listed concrete reasons why.
If you are really interested in going to a particular program, tell them that you want to go there and more importanly, list the reasons why. And they should be good reasons. If you come across as superficial in this process, that could hurt you...as the cops say, "anything you say can be used against you."
Now let's say your program of interest contacts you and tells you that you are ranked to match. I don't think it hurts to tell them that the feelings are mutual. But gosh, I have heard some stories where this happened and on Match Day something totally different happened. It happened to two of my friends back in 2002...but they were matching in ENT and Ortho. Whatever you do, realize nothing short of a contract is a contract...and you do things at your own risk.