@JimmXinu: After writing the above, and looking at the Modify ePub plugin, I thought of an alternative for the multi-level ToC.
At the moment, you are building a new ToC from the files that are copied to the new book. An alternative is to copy the NCX as well and then remove the entries for the files/links not copied. This would keep the hierarchy. Another advantage is if there are ToC entries pointing to places inside the files, these will be maintained as well.
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