I have added support for nesting of next level header tags to the toc for drupal 7. See the attached file .tar.gz file and note that when I uploaded it issue tracking system added an underscore. You will likely want to rename the file.
Since there have been requests by others for such a feature in the past I am submitting the code so that it can be used in the official version. Feel free to use, modify, or include any part of it as you see fit.
Needs review
1.0
Code
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It's likely this issue predates Contrib.social: some issue and comment data are missing.
Thanks @dlross, I took the zip and simplified it a bit and got it working for myself, here it is as a merge request.
The biggest change is I left the regex capture groups alone and changed it to h[23] instead of (h2|h3) which introduces another capture group. And I removed a condition that looked the same as the else {