In xfig in the 'edit' menu (or update, or possible text options line)
you can label text as 'special' which means it doesn't do all of its
text processing.  A combination of 'special' and exporting to LaTeX
(native picture macros) or eepic (enhanced enhanced picture mode --
include [epic,eepic] in your substyle line) for curves &tc and then
\input it.

I've put this response in ~rph/tex/doc/mathfigures and indexed it in
~rph/tex/README 

In article <5tkilh$fh7@darkstar.ucsc.edu>, staapa@cse.ucsc.edu (David Staepelaere) writes:
|> I'd like to create a simple figure with some drawing program like xfig
|> for inclusion into a latex figure. 
|> 
|> So far, so good.  
|> 
|> The wrinkle is that I'd like to include labels/text in the figure that
|> use latex math mode (like $\phi_0$ or something).  I remember that
|> there was some way to do this but I've forgotten how. 
|> 
|> Any pointers would be appreciated.
|> 
|> David