No, you are right, it's not valid. Well, I changed it, and converted again. Now the first file in the list was converted, but still no table of contents or other files. I'm working from the demo file, so I assume it is okay for conversion, and my master file looks like this:
<html>
<head>
<style type='text/css'>
.toc { page-break-after: always; text-indent: 0em; }
.tocpn {text-align: right; }
.tocchr {text-align: right;}
.hanging_indent { padding-left:4em; text-indent:-4em }
.drop { text-indent: 0pt}
.drop:first-letter { font-size:xx-large}
.h2 { page-break-before: always; text-indent: 0em;}
</style>
</head>
<body>
<h1>Book title</h1>
<p>Blurb text</p>
<h2 id="toc">Table of Contents</h2>
<ul style='page-break-after:always'>
<li><a href="#every_year_again_its_christmas">Every Year Again it's Christmas</a><br /> —For Silverchipmunk</li>
<li><a href="#now_and_then">Now and Then</a><br /> —For Laura McEwan</li>
<li><a href="#the_other_side_of_the_window">The Other Side of the Window</a><br /> —For Ancasta</li>
</ul>
<a href="every_year_again_its_christmas.html">story one</a>
<a href="now_and_then.html">story 2</a>
<a href="the_other_side_of_the_window.html">story 3</a>
</body>
</html>
I don't know if I am adding the links to the files correctly, but I assume if I want a table of contents that link to the story headers, I would need to do it this way?