You can try the following:
count(//element/Element1[namespace-uri()='mynamespace'])
If you are using XPath from an environment such as Java or C#, you should first bind a prefix to the namespace, which depends on the API you are using, but will be something like
xpath.declareNamespace("f", "mynamespace")
and then evaluate the XPath expression
count(element/f:Element1)
I deliberately chose a different prefix from the one in your source document just to show that you can use any prefix you like, but of course your code is more readable if you are consistent in your choice of prefixes.
For the following valid XML
<element>
<e:Element1 xmlns:e="mynamespace"></e:Element1>
<e:Element1 xmlns:e="mynamespace"></e:Element1>
<e:Element1 xmlns:e="mynamespace"></e:Element1>
<a/>
</element>
this XSL
<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform" xmlns:e="mynamespace">
<xsl:template match="/">
<xsl:value-of select="count(element/e:Element1)"/>
</xsl:template>
</xsl:stylesheet>
gives the desired output of 3.
The selector is qualified with the correct namespace.
You were close in your question and you could drop the namespace and use the following XSL instead:
<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
<xsl:template match="/">
<xsl:value-of select="count(element/*[local-name()='Element1'])"/>
</xsl:template>
</xsl:stylesheet>