I figured it out myself, here is the resulting XSL:
<xsl:stylesheet version="1.0" 
xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
  <xsl:template match="/">
  <xsl:apply-templates/>
 </xsl:template>

 <xsl:template match="figure">
  Figure <xsl:number format="1" level="single" count="chapter"/>.<xsl:number 
format="1" level="any" count="figure" from="chapter"/>
 </xsl:template>

 </xsl:stylesheet>



"news.microsoft.com" <djo267 at hotmail dot com> wrote in message 
news:e8cE%23u93FHA.3876@T......
> Hi everyone, I'm trying to get the xsl:number element to work and am 
> having some issues.  I'm not sure if what I'm trying to do is even 
> supported.  I have figure elements at various levels underneath chapter 
> elements and am trying to number them sequentially by chapter.figure 
> number.  The XML/XSL/CURRENT OUTPUT/DESIRED OUTPUT I have shown below is 
> what I have so far.
> any help is appreciated.
> thanks, dan
>
> CURRENT OUTPUT:
> 1.1
> 1.2
> 1.1
> 1.1
> 2.1
> 2.1
>
> DESIRED OUTPUT:
> 1.1
> 1.2
> 1.3
> 1.4
> 2.1
> 2.2
>
> XSL:
> <xsl:stylesheet version="1.0" 
> xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
> <xsl:template match="/">
>  <xsl:apply-templates/>
> </xsl:template>
>
> <xsl:template match="figure">
>  Figure <xsl:number format="1.1" level="multiple" count="chapter | 
> figure"/>
> </xsl:template>
>
> </xsl:stylesheet>
>
>
> XML:
> <root>
> <chapter>
>  <figure/>
>  <figure/>
>  <section>
>   <para>
>    <figure/>
>   </para>
>  </section>
>  <section>
>   <subsection>
>    <para>
>     <figure/>
>    </para>
>   </subsection>
>  </section>
> </chapter>
> <chapter>
>  <section>
>   <para>
>    <figure/>
>   </para>
>  </section>
>  <section>
>   <subsection>
>    <para>
>     <figure/>
>    </para>
>   </subsection>
>  </section>
> </chapter>
> </root>
>