If you want to use titles, then use appropriate styles (I suggest Heading 1, Heading 2).
http://www.mswordhelp.com/2010/04/wo...oft-word-2002/

As to numbering, that is just a matter of creating a numbered list. And in place, where you do not want to have your numbering, put your cursor there and "switch" numbering off. The rest should continue uninterupted.

For the case of multilever numbered list, in MS Word 2002 click on Format - Bullets and numbering and then click on "Outline Numbered" tab and pick appropriate format.

That should do it.

If this explanation is not detailed enough, let me know.

mike