ADE is working fine for me on full tables of contents. (v2.0.1 or v1.7.2 on Win 8.1)
A few things to try to get nearer to an answer ...
There are lots of bugs in ADE2.0 (and 2.0.1). Try replacing ADE2.0 with the older but more reliable v1.7.2.
(You can have them both installed at once if you like.)
Version 1.7.2, it is a little difficult to find, available on Adobe site for Windows and for Mac.
The forum software is sometimes corrupting the link above. There shouldn't be a blank in 'editio ns.html'. The following redirects to the same page: http://tinyurl.com/diged172
Some people have found ADE trying to upgrade automatically.
It appears (not 100% sure) that if you install ADE2.0 as a new install (not as an upgrade) that your 1.7.2 will continue to run.
Probably best to say no if 2.0.x installation asks if you want to migrate your library.
For DRM free ebooks, use the free and vastly superior Calibre. http://calibre-ebook.com/
For DRM ebooks, you can use Sony Reader; free download from Sony intended to run with Sony eReaders but works quite happily without. I prefer ADE1.7.2 to Sony Reader. https://ebookstore.sony.com/download/
Try removing the DRM using epubee, and looking inside the files to see if the links are properly stored.
Only an option if you are reasonably technical.
I do NOT advocate using such code to get around the valid limitations placed on a DRM book,
but for this form of debugging it could be very helpful.
Thank you so much for the helpful info!
Even when I downloaded the older version of ADE it is still showing the same results so I've emailed Smashwords for their advice.