All page liks in top menu point to .html

Hi All:
WP-30
I am using shades-of-blue template which calls the menu as follows:
<?php wp_list_pages('title_li=&sort_column=menu_order&depth=2,'); ?>
My menu generates nicely and I was able to style it to my linking however ALL links in the menu point to ‘.html’ so the end result when clicking on any item is http://172.16.1.55/.html and I get the home page. I am not using permalinks (this is an IIS 6.0 dev box) and if I browse directly to something like http://176.16.1.55/?page_id=22 the pages load just fine.
What am I doing wrong?
Also, It seems that when the pages were created (initially) they generated guids in the posts table adding in a sub directory path like http://172.16.1.55/wp30/?page_id=22. Once I migrate this site from a staging area to a live environment doesn’t this mean all my links are going to break thus rendering my sites content inaccessible through the menus?
Thanks in advance for your help.