The easiest way to be able to restart numbering reliably is to use outline
numbering (as described at
http://www.shaunakelly.com/word/numbering/OutlineNumbering.html) selecting
as your top-level (unnumbered) style one that reliably interrupts your
numbered lists. FWIW, Restart Numbering (in the Context menu rather than the
B&N dialog) works pretty reliably in Word 2002 and 2003.

Hi Rod

On your specific question about why the restart/continue gets greyed out, as
far as I understand it this would indicate that the selected paragraph is
being interpreted as the first item of a separate list, rather than a member
of a list that has members earlier in the document. (This will happen if you
change pane when in Format > Bullets and Numbering, but Word may also screw
you when it pastes numbered items.) This is not at all good news if you are
trying to use styles and keep some predictability in your numbering, as it
means that the list formatting is *not* coming from your style, even if it
looks like it is. Having multiple lists also probably means that you are
building up list formats in your document, which may be a further source of
difficulties.

The problem should resolve if you press Ctrl-Q (to reapply the style) - that
will produce continuous numbering, so you would then need to use your chosen
method to restart numbering if that's what you want.

Personally I think the restart command works fine in short and short-lived
documents where you can see what is going on, but is really quite dangerous
in something like a user guide where you are likely to edit over a long
period, copy, cut, paste and change your mind on list items etc. If it is
too late for you to change your style set up to restart on higher level, I
would be suggest you leave the list numbering continuous during editing, and
set the restarts when you check and tidy pagination ('proofing' stage, if
you think like that) before distribution of a draft. You might want to look
at Steve Hudson's 'restart after headings' macro in this case.