Word 2007, 2010, and 2013 won't let you apply multilevel numbering via the Modify Style dialog box. You have to do this via Home tab | Multilevel List. See
http://shaunakelly.com/word/numberin...g20072010.html for "everything" on numbering in Word 2007.
To edit an existing multilevel list of headings, place the insertion point in the first Heading 1 paragraph of the document, and then click Home tab | Multilevel List | Define New Multilevel List (as you can tell, the command is misleading).