I have a Module set so Lessons must be completed in order in Lt. If Students are working on later Lessons, what happens to their Work if an earlier Lesson has its Progress Reset?

When a Module is set to be completed in sequence, resetting the progress of a Lesson when Students are already working on later Lessons will not affect those Lessons later in sequence - just the Lesson that is being reset.
All Student Work will be retained in the later Lessons, and Students will continue to be able to access those later Lessons, assuming they have already been started. They will not be 'locked out' even though the earlier Lesson has now 'not been completed', and no Work will be lost, aside from the Lesson that has been reset.