I can't post attachements here, so you can't see what the output looks like, but here is the preamble and figure insertion commands I used. I think it turned out nicely. The figure is embedded within the text.. I have just included whtat I think are relative snippets.

%% LyX 1.3 created this file. For more info, see

http://www.lyx.org/.
%% Do not edit unless you really know what you are doing.

\documentclass[english]{article}

\usepackage[T1]{fontenc}

\usepackage[latin1]{inputenc}

\usepackage{graphicx}

\makeatletter

%%%%%%%%%%%%%%%%%%%%%%%%%%%%%% LyX specific LaTeX commands.

%% Bold symbol macro for standard LaTeX users

\newcommand{\boldsymbol}[1]{\mbox{\boldmath $#1$}}

%%%%%%%%%%%%%%%%%%%%%%%%%%%%%% User specified LaTeX commands.

\usepackage[T1]{fontenc}

\usepackage[latin1]{inputenc}

\usepackage{geometry}

\geometry{verbose,tmargin=2.54cm,bmargin=2.54cm,lmargin=2.54cm,rmargin=2.54cm}

\usepackage{babel}

\usepackage{graphics}

\usepackage{setspace}

\usepackage{indentfirst}

\doublespacing

\makeatletter

\usepackage{babel}

\makeatother

\begin{document}

\noindent \begin{flushleft}where $\chi$ denotes distorted waves. \end{flushleft}

Equation (\ref{10}) refers to four different vectors: $\vec{r}_{n}$,

$\vec{r}_{p}$, and $\vec{r}_{d}$ and $\vec{r}_{pn}=\mid\vec{r}_{p}-\vec{r}_{n}\mid$.

The geometry of the reaction is presented by Figure \ref{1} . It

can be seen that only two of the four vectors depicted are independent.

The vectors $\vec{r}_{d}$ and $\vec{r}_{p}$ are associated with

the distorted waves corresponding to the incident and scattered particles.

The vector $\vec{r}_{pn}$ is necessary to describe the internal deuteron

state. The vector directed from the target nucleus to the center of

mass of the deuteron system is denoted as $\vec{r}_{d}$, and the

vector directed from the proton to the neutron within the incident

deuteron system is denoted as $\vec{r}_{pn}$. If it is desired to

chose $\vec{r}_{d}$ and $\vec{r}_{pn}$ as the coordinates of integration,

the other coordinates can be expressed in terms of these.

%

\begin{figure*}

\begin{center}\includegraphics[%

width=1.0\textwidth]{figure1.eps}\end{center}

\caption{\label{1}Reaction Geometry}

\end{figure*}

\begin{flushleft}The equations of transformation in this case are

given by:\end{flushleft}

Hope this helps. It correctly refers to Figure 1 in both the labeling of the figure and inside the text discussing it. Oooops...nevermind...my referencing is not that good, and I have figure references actually pointing to equations later in the paper (I never label or refer to equation 1 explicitly, so that I can label the figure as 1 and refer to it...latex just gets the equation numbering right at the time its processed). Oh well, looks like I cludged things manually and referencing wasn't too important, just printing out the number correctly, which I would have to change if I inserted more figures, equations, or changed their order. Sorry....