Although you're at a tiny bit of a disadvantage, being grade 3 theory will mean that it will be very easy to catch up as the majority of music 1 students would not have touched any kind of theory at all. In year 9/10, all your really do is scrape the concepts of music, however in year 11/12, you learn them in depth and you learn how to apply them to analysing unknown pieces. So basically to answer your question, yes you do need to know year 9 and 10 things, however it's really easy to catch up and even surpass your classmates after doing a bit of work.
I did music 2, however from what I know (from friends), music 1 is really fun! At my school they had quite a big class (I think 22 students), and all the stories that I've heard makes me sometimes wish that I did music 1. In music, everyone is good friends and it's fun to experience the last minute rush of your helping friends with performances, compositions and cramming as well as doing your own. Everyone helps each other and the topics are really interesting.
From what I know, you have to choose 3 topics from a variety of topics including:
Medieval music, Jazz, Australian music, An instrument and its repertoire, Baroque, methods of notating music, music for large ensembles, program music, music ineducation, music and religion, music of a culture, music of the 18th century, music of the 19th century, pop, the renaissance, music of the 20th and 21st centuries, rock, technology and its influence on music, theatre music and music and the related arts
If your'e scared about not knowing enough, you can always just learn the concepts of music and a bit of what each includes
good luck