Air is conditionally unstable if, when it becomes saturated, it becomes unstable.
No, it is dependent on the actual conditions - in the origional post if the temp at 1,000' is 20 and at 2,000 it is less than 17 then it will be unstable, 2,000' temp warmer than 18.5 and the air is stable, it is only when the ACTUAL lapse rate is between 1.5 and 3 (i.e., in this example temp at 2000' is between 17 and 18.5) that it is conditionally unstable.