I just tried this with no configuration changes (just out-of-the-box defaults) for a provider directory that has an index and this is what the epub looks like in Calibre:
The hyperlinks work just fine and the second-level entry jumps to the correct location in the component file (you will have to play with tweaking the entries, but the indent levels are preserved).
For comparison, here's the Kindle mobi file created from the same FM using all default settings:
Again, all of the hypertext links work and the index is properly indented.
I would suggest that you try the 30-day trial version of FM12 with your actual data to see how well it addresses your needs.