Code:
on *:TEXT:!cry:#: {
 if (%flood.cries) || ($nick != $mid(#,2) return
 inc %cries
 if (%cries == 1) msg # $mid(#,2) has started crying for the first time! 
 else msg # $mid(#,2) cried %cries times!
 set -u5 %flood.cries On
}
You weren't using /else for your /if, meaning it would first set %cries to 1 and immediately increment it to 2 for one !cry. I also removed /set, you can simply use /inc on a non existing variable and it will create a global variable. Changed /halt to /return because halt is meaningless inside an event, it will simply act as a return, however /return most likely involves less steps.

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