I am developing software that uses SharePoint Web Services (UpdateListItems) to add or bulk load items into a list from a Lotus Notes extract. More on this later when I finish. Sequence numbers are not one up numbers from the last item (last item + 1). Instead they are true sequence number, similar to Oracle and Sybase. I found this out by bulk loading a few items then deleting them and reloading. So, if you are starting from a scratch list or a list that you have not loaded/deleted any items from, then this is not big deal. However, if you have loaded/deleted items, then the numbers will be out of sequence.
As far as I can tell, there is no sequence number reset. Too bad.