Thanks to Shauna Kelly's site:
http://www.shaunakelly.com/word/numb...ppendixes.html, I was able to find a great work around for this.
I side-stepped the Headings issue by a clever use of Table/Figure captions. I used the "Numbering" option to apply my heading at that particular level that the image/table was going to be at, (heading 3 for the example given earlier), and that fixed the numbering issue. The format was screwy, so I used a new style that did what I wanted - without the numbering hassles. Furthermore, the easy "Cross Reference" feature under the References tab made updatable callouts to the table/figure easier than messing with field codes!
Note: for anyone else dealing with a similar issue, it is easier when the figures have "In Line with Text" text wrapping, as the caption text can be formatted with a list level, thereby showing up in the Navigation Pane / Document Map.
If the figure has, say a square, or any other text wrapping on it, the caption will appear as a text box. And those do not show up in the Navigation Pane / Document Map.