Hi newbE,
This is a great question and after looking at your form file, you are on the right track, but it is going to be a little more tricky than what you had thought.
First, you need to move your drop-down options to a secondary data source, and populate both drop-downs from this list.
However, on the second, filtered drop-down, you need to use a data filter whenever you are setting the entries in the properties dialog box. The filter would be something like:
New2DSValueField = MainDOMRepeatingValueField
In general, it is much easier to work with drop-downs if their options are stored in a secondary DOM. If you need a more detailed instruction set for this process, there should be a HowTo coming out at the end of the week that might give you some insight.
Matt Faus / Microsoft InfoPath MVPQdabra® Software / Streamline data gathering to turn process into knowledge