This actually turned out to be a couple of issue that caused the problem that drove me crazy. The first was (may not supposed to have an effect but did anyway) Was chapter Lables. Chapter Labels
I only had the Chapter Label set on a few of the chapters and it turned out that it was the unset one causing the issue.
The next issue was in the compiling stage.
When compiling for Kindle (.mobi) I had previously selected “Generate Html table of contents” and this connected to the lable issue caused the corrupt TOC which had paragraphs for toc items!
I unselected this and selected “Use flat list of contents in Navigation controls (NCX)” and now with my custom TOC everything compiles properly and menu items work on the kindle app!