It depends on what you define as theory, though. Things like analysis and extending algorithms, and understanding the concept of recursion, fall well into the realm of theory. People I've dealt with of the second type go completely off-course with this, too.
I've found they do ok when it comes to questions like "Define and give me an example of a ______", but become utterly lost when given a question such as "Design and implement in pseudocode a set of data structures/classes/etc. to accomplish vaguely-defined task x." As soon as you call upon them to apply their knowledge of theory to something they haven't memorized, they become completely lost. Maybe I'm just worrying over the semantics of the word theory too much.
I agree about how the lack of passion can be unbelievably annoying. Though, it's encouraging you've seen so many driven people, see them as a positive. I wish more people had that same attitude.
I agree, and I suppose by "theory" I mean anything that isn't code (even pseudocode). I've met many "type 2s" who can give you a great database and object model for whatever you feed them, but would be utterly lost if ever asked to translate into code.
And God help them if you describe a bug to them and ask them where they'd begin looking.
In the end it boils down to not doing. To be good at anything you need practice and experience, not just rote knowledge. Type 2s do not have this, since nobody holds a gun up to their head and makes them code till the early morn.
I've found they do ok when it comes to questions like "Define and give me an example of a ______", but become utterly lost when given a question such as "Design and implement in pseudocode a set of data structures/classes/etc. to accomplish vaguely-defined task x." As soon as you call upon them to apply their knowledge of theory to something they haven't memorized, they become completely lost. Maybe I'm just worrying over the semantics of the word theory too much.
I agree about how the lack of passion can be unbelievably annoying. Though, it's encouraging you've seen so many driven people, see them as a positive. I wish more people had that same attitude.