It seems that I have created the Rule incorrectly. Problem is I don't know how to create the XPath correctly to get the Display Name associated with the value. Here is how I created the Rule.
I created a test InfoPath doc with 2 fields (field1 and field2). field1 is a drop down and field 2 is a text box. field1 gets it's data from the secondary datasource (web service that returns a dataset with 2 columns (companyid and company name).
Setting the datasource for the drop down list I select the repeating table from the provided tree for the Entries text box. For the Value, I select the field companyid. For the Display Name, I select the field companyname.
For creating the rule, I select the Action "Set a field's value". For the field I select field2 from the main datasource. For the Value, I select companyname from the secondary data source.
When I preview the form, I select any company name from the drop down but it always selects the first company name to display in field2.