Hello. I have just upgraded Lyx - and find that the method of using EPS files and Psfrag, as described by Allen L. Barker in "howToUseLatexMathWithXfig", has lost some of its functionality in the Lyx-1.2 - i.e. when you scale the graphics in Lyx, the text does not any more get scaled as in lyx-1.1.6.
What to do? Sincerely Yours -- Morten Langlo Denmark
