How do I set up primary and foreign keys referencing two different tables?
The actual error message you are getting is because your CREATE TABLE statement is malformed as you cannot have a foreign key refer to more than one table. However you can still have the structure that you require by having two separate foreign keys. You can only use a composite foreign key if all columns that will be added to it belong to the same key in the target table.

CREATE TABLE ASSIGNMENT (
    ProjectID       INT             NOT NULL,
    EmployeeNumber  INT             NOT NULL,
    HoursWorked     NUMERIC(6,2)    NULL,

CONSTRAINT AssignmentPK PRIMARY KEY (ProjectID, EmployeeNumber),
CONSTRAINT AssignmentFK_Project FOREIGN KEY (ProjectID)
  REFERENCES PROJECT(ProjectID)
   ON UPDATE NO ACTION
   ON DELETE CASCADE,
CONSTRAINT AssignmentFK_Employee FOREIGN KEY (EmployeeNumber)
  REFERENCES EMPLOYEE(EmployeeNumber)
   ON UPDATE NO ACTION
   ON DELETE NO ACTION
);