Thanks for your response. I answered my own question.
I traced the Markdown "spec". Seems Discount and Textastic are doing what they should.
A <link> tag is *not^ an HTML block-level element, because this tag normally appears in the <head> not in the <body>. And so, it is correct behavior that Discount generates HTML that encapsulates <link></link> within a paragraph as <p><link></link></p>.
Perhaps it might be either a bug or a problem that there is no tight Markdown specification, that the '<' and '>' characters in '<link></link>' are not converted to HTML entities in this case, but maybe that is a desirable feature.
It is a nice trick that you suggested to link to an external CSS stylesheet. It works well for previewing, even though an external link should appear within the header and not the body, and the HTML can be easily corrected to conform to spec.
Thank you again for bringing this wonderful app to iOS. It is one of my favorites.
What happens if you close all your files, and *quit* the Textastic app, and then relaunch the it? I have found that some browsers cache stylesheets and don't reload them even if the referencing page is refreshed.
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