Let me help get your check sequence back in order.
Since you've already made sure that the custom transaction numbers is checked as well as the warning for duplicate check number used, you'll need to create a new check to get the sequence back in order.
Just follow these steps:
Click the Plus (+) icon and select Check. Fill out the form as necessary.
If the Check no. field doesn't have the correct number, enter it manually.
Select Save and close to complete the check. (You can create a dummy check and delete it after.)
Now, click the Plus (+) icon and select Check again. You'll see the check number reset to the number immediately following the one on the last check.