Yes you could have just edited the toc.ncx file. If you look closely (try it with a new "test" page book, containing only an h1 and an h2) you will see there is some fairly simple nesting of the <navpoint> elements. Just a case of "cutting" those nested <navpoint>...</navpoint> elements out to paste them after the parent's closing </navpoint> so that they are all at the same top level.
We hope to have a GUI for doing this in a future release.
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