Take a look at the course blog for the topic "TextEdit Travails." Looks like you need to set the preferences to "plain text." Go ahead and do this, and re-upload (and re-tag, so I look at it again), and you should be good.
Here is my introduction. I had a negative visceral reaction to the lack of markup on this challenge, so I strayed from the directions and I added lots of and hyperlinks.
HTML is the "correct" choice, though .htm will also work. The latter is a result of limitations of the early DOS & Windows systems, which could only handle 3 letter extensions (and 8 letter filenames). Why is it still used today? Microsoft continues to push it as a feature, not a bug, and those using MS servers or ASP are more likely to use it, unless, of course, it is a .asp page. But the standard usage is still .html.