Warning  Making even minor changes to an outline numbering scheme won't necessarily change the initial position you've selected in the gallery, but rather may create a new gallery position, overwriting an existing one. Because of this problem, attaching numbering to styles is strongly recommended. This is covered in greater detail later in this chapter and in the chapter on Styles.
Whats happening is that the first set of NUMBERING (including sub numbering) i.e for 1.0 HEADING 1 is coming PERFECTLY as numbered. I hit "enter" at any level of numbering, word automatically puts the next number below that number. However for the rest of the headings such as 2.0 and 3.0, where there should be 2.1 there is 1.1, where there should be 2.2, its 1.2 and so on and so forth. Same for 3.0 and its numbering subsets.
To save the list style to a template so you can use it with other documents, select the list in the document. Access the Multilevel List dropdown and choose Define New List Style. Enter a descriptive new and select the New documents based on this template (at the bottom). Once you click OK, the multilevel list style will be available in all new documents.

See Word's Numbering Explained by John McGhie, MVP - comprehensive and not pretty (Downloadable pdf file in letter size) - Reading this is vital to anyone attempting to use automatic numbering or bullets in a law office setting or other places where the documents are likely to be reused or heavily edited. See also How to Create a Template with a downloadable template with style-based numbering.

You probably know about Word's mail merge feature, and you might even use it to print labels or other documents, where some of the information changes (such as form letters). You can use the same feature with Publisher. Although you might not think of Publisher as an Office app, it comes with several different versions of Office. In this article, I'll show you how to print sequentially numbered tickets using Publisher and Excel. This article provides instructions for Publisher 2007, 2010, and 2013.
Summary: Need to add a unique serial number to each printed copy of your document? Here's a quick way to print such numbered versions. (This tip works with Microsoft Word 97, Word 2000, Word 2002, and Word 2003. You can find a version of this tip for the ribbon interface of Word (Word 2007 and later) here: Using Sequential Document Serial Numbers.)
multilevel headings in legal format are just soo badly broken. If it requires 6 steps to do a basic everyday document management process, why is there not a choice for a more reliable solution. I have been fighting this for about half  an hour – I may was well use notepad to do my documentation at this point, but I will persevere… or I will start a brand new document. How broken a solution is that. …car won't start, get a new car!  Thanks for the pointers, almost there.
Creating a numbered list is simple and most users catch on right away. One more thought before we move on—use numbered lists correctly. A numbered list, by its nature implies that the number of items or the order of those items has meaning. A list of simple facts, where neither order nor number have meaning is a bulleted list, not a numbered list. You can turn what might otherwise be a bulleted list by forcing a number into the mix, as I've done with our example list. Remove the word Seven from the title and you have a bulleted list!
After combining three documents that contained track changes and reviewer comments, heading numbers for levels two and four became blacked out. The user could not find a way to fix it in the style settings or elsewhere. She reapplied a different heading numbering style and the numbers showed once more, but the next time she opened the document, the blacked out heading numbers were back again. 

Whats happening is that the first set of NUMBERING (including sub numbering) i.e for 1.0 HEADING 1 is coming PERFECTLY as numbered. I hit "enter" at any level of numbering, word automatically puts the next number below that number. However for the rest of the headings such as 2.0 and 3.0, where there should be 2.1 there is 1.1, where there should be 2.2, its 1.2 and so on and so forth. Same for 3.0 and its numbering subsets.
If you know in advance that you need outline numbering for your paragraphs, you will want to choose the correct format from the Bullets and Numbering dialog box. Applying one of the preset formats to a paragraph or paragraphs that are already bulleted or numbered applies it to the entire list. There is a specific tab for outline numbers — the Outlined Numbered tab.
This simple technique makes quick work of a single-level numbered list and accommodates multiple lists within the same document. However, it doesn't work with multilevel lists. If you must work with an existing document, modify the heading style as shown above. Then, select each heading and apply the heading style that you modified by adding a numbering scheme. As I mentioned, this isn't possible if the existing document already employs the heading style. But if you face numbering headings in a document, you know you've got the request covered—and you won't lose a minute's composure. Just tell them, "Yes, I can do that."

After struggling with multi-level lists I finally figured out one of the major problems. If you are struggling but you haven't already read other tutorials, you definitely should, but this tip will be useful no matter what. Before setting or re-setting the list for a given heading, select "None". Then go back and select the list you want. For some reason if you try to switch directly from one list to another it does horrid things that I do not understand. Hope that helps. desktop numbering using coreldraw
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