Template Problems in MX

I?m using Dreamweaver MX 2004. I recently changed hosts, and put two web sites
on one account. Website2 is a folder under Website1, and the host redirects
the URL there, so end users see www.website2.com in the URL.

The file structure is

Site1
-folder1
-folder2...
-templates...
-folder3...
-site2
--templates
--page1.html
--page2.html...

Everything worked fine until I changed the template in the templates folder
under site2. It updated the files, but messed up the paths in all the links.

<link href="ppa2.css" rel="stylesheet" type="text/css">
. . .
<td width="11%" class="button2"> <a href="finalistsPPA5.html"
class="nounderline">Finalists</a> </td>
<td width="10%" class="button2"> <a href="winnersPPA4.html"
class="nounderline">Winners</a> </td>
<td width="10%" class="button2"><a href="podcast.html"
class="nounderline">Podcast</a></td>
,,,,

became:

<link href="ppa2.css" rel="/templates/stylesheet" type="text/css">
. . .
<td width="11%" class="button2"> <a href="/templates/finalistsPPA5.html"
class="nounderline">Finalists</a> </td>
<td width="10%" class="button2"> <a
href="/templates/winnersPPA4.html" class="nounderline">Winners</a> </td>
<td width="10%" class="button2"><a href="/templates/podcast.html"
class="nounderline">Podcast</a></td>

I've tried several things, with no luck.

I tried putting the .dwt file in the top "templates" folder, applied the code
(to restored files) and got the same result. I tried loading individual pages
and applying the template. That turned them into a .txt file.

One thing I haven't tried, because I just thought of it while typing this, is
creating a second site within Dreamweaver that points to \site2 as the root.
Is this likely to work, or is there a better way to do it?