So naive questions from me are:

1. Do I set up outline numbering that both headings and para numbering have to match (i.e., 1st level of para numbering (1.) MUST match Heading 1 (1.)? Or can the outline numbering differ (i.e., 2nd level of para numbering (i.) DIFFER Heading 2 (1.1.)?

2. Do I start with multi-level numbering first (I think the reading shows start with Styles, which may lead to my confusion)?

Apologies for being slow on this one.

When you create the Multi-level List style the styles you want to use it with (headings, etc) must not have any numbering. The numbering is controlled by the list style and applied whenever a connected style is used in the document.

You start with styles if the styles you want to use the numbering with don't exist. For the numbering you need to create a List Style and assign the styles you want to use at each level. You also set the numbering you want to use at this stage.

If you want the numbering of the numbered paras to automatically reset then the style that will reset them will need to be included in the list style, but without any numbering. That specific style must be applied in the document to restart the numbering.