I am having a related issue. I am using Notepad++ for the formatting and then uploading to Mobipocket. I followed DMSmillie's great instructions but I'm still getting an error after clicking update. I am using Windows 7, I have IE9 loaded but use Chrome, and I am not using Calibre.
The tag I used is <a name="toc"></a> at the top of the Table of Contents. The file name that I am trying to link in the guide is mbp_toc.html and I added #toc.
Am I missing a step? Do I have to go from Notpad++ to Calibre and then to Mobipocket?
Would appreciate any help anyone can provide.