Webster 1913 himself has a quote from Sir W. Hamilton regarding this very conundrum:
This word [theory] is employed by English writers in a very loose and improper sense. It is with them usually convertible into hypothesis, and hypothesis is commonly used as another term for conjecture. The terms theory and theoretical are properly used in opposition to the terms practice and practical. In this sense, they were exclusively employed by the ancients; and in this sense, they are almost exclusively employed by the Continental philosophers.
In more modern English, this means the word theory should be used like this: "In theory, X, but in practice, Y." In a scientific context, the word hypothesis is preferred, as in "Z is just a working hypothesis."