Heading 2 numbering not resetting to follow preceding Heading 1.

Did you try using  the built-in numbering scheme before you  created one from scratch?  If you don't have any customizations to the number formatting or style, indents, and such, the built-in scheme is all you need.

You can "start over" by putting the cursor in the first heading 1, clicking the multilevel list icon, and in the list gallery, clicking the built-in numbering badge that shows this:  1 Heading 1, 1.1 Heading, 1.1.1 Heading 3, etc.

Even if you want only minor customizations, though, you may want a list style in your template. So after you have applied the built-in number scheme and with the cursor still in  the first heading 1, go back to the list gallery and click Define new List Style (name the list style) > Format  > Numbering.  The dialog will show all the settings of the current list (where the cursor is) except that no headings will be linked to the numbering levels.  Customize the settings and add the heading links. 

One of the advantages of starting with a built-in list is that the number fields and restarts are already there and correct.   But the biggest one is that you don't have to do all of those steps and clicks!

Pam

You must set up the heading numbering as a multilevel list linked to the heading styles. If you select the 1 Heading 1, 1.1 Heading 2, 1.1.1 Heading 3 list type in the Multilevel List gallery, the list levels will be linked to the styles automatically, will have the numbering you want, and will restart after higher levels. For more on this, seehttp://www.shaunakelly.com/word/numbering/numbering20072010.html.

Once the numbering is linked to the styles, you can modify the formatting of the styles any way you like (in the Modify Style dialog) except wrt numbering; any changes to the numbering or indents (left or hanging) must be made in the Define New Multilevel List dialog.