Broken links on publishing

I have a customer who built a site using SiteBuilder under 3.2 and now after we've upgraded to 4.0 the publishing produces unusual results.

Instead of the usual aspx files it uploads, it is uploading static htm files.

This by itself isn't a huge problem but the broken backlink checker for the menu items are wrong and contain a path like 3984098-3483843-3434etc\page2.htm instead of just page2.htm as it should be.

I'm using ftp publishing, and the verify location comes back as "Dynamic"