Since nobody else has jumped in....

Ice,
I'm not sure what exactly you want to do, from your question. The short answer is "yes", but the real question is will the circuit do what you want it to.

Significant issues are: how many wires and posts on the present switch ("retracts up/down") and does the present switch break a circuit or route power to a different wire?

From your description, the present switch sounds like a S.P.S.T. (Single Pole Single Throw), like the light switch on the wall. S.P.S.T. either opens a circuit or closes it (no power to load or power to load).

Your "on/off/on" sounds like a S.P.D.T (Single Pole Double Throw). Only one common (or power), single Pole. Two 'On's, double throw. One throw opens one side and closes the other, and vise versa the other throw.

You can replace a S.P.S.T with a S.P.D.T., but you are wasting one side of the more expensive D.P.S.T.
If what you already have is actually a S.P.D.T. (a on/b off in one throw and a off/b on in the other throw), Then, YES, you can replace the S.P.D.T. with a S.P.T.T. (a on/b off in one throw (say, toggle full left), a off/b off in the next throw (toggle center), and a off/b on in the last throw (toggle full right) as in 'on/off/on).

Clear as mud? Send more info on the circuit and we'll see if we can sort it out.

Splat