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Sorry if this is real lame.
I have a site with the following structure (kinda)
When I run coffeecup or any other sitemap generator they ALL report errors and report the following structure:
Notice the last three files.
Should I ignore it? If not, how the heck do I fix that!
I'm worried Google will put me in the sin bin for being a poor quality site.
This is what I have on the products/index.php page
Should I be using
It is possible that there is some code in the server configuration that is mapping the file product1.php onto multiple URLs, and that is why your sitemap generator finds multiple URLs.
The real question is, if you click on one of those "product" links, does it work?
If you have a link on a page, and it refers to another page at the same URL "directory" level, then using href="otherpage.php" is fine. If the other page is in the "directory" above the one that is linking, then you'd use href="../otherpage.php", and if below, then href="/child-directory/otherpage.php".
You can also use server-root-relative links by specifying a leading slash to point to the Web root "directory" and then work down from there: href="/parent/child/child/otherpage.php". Finally, you can also use the canonical URL as you stated in your post.
This is all general info; It will take a much more-detailed description of your server type, server configuration, "shopping cart" and server software, and development environment in order to diagnose this problem.