Shame on me. RTFM.
I went to all the trouble of running through a debugger to see where it was doing the "correction" on the HTML when the answer was in the documentation if I had known better what to look for.

At line 291 it does a check for valid tags within other tags if the '_implict_tags' value is set. This is covered in the documentation with this:

$root->implicit_tags(value)
    Setting this attribute to true will instruct the parser
to try to deduce implicit elements and implicit end tags.
If it is false you get a parse tree that just reflects 
the text as it stands, which is unlikely to be useful for 
anything but quick and dirty parsing. (In fact, I'd be 
curious to hear from anyone who finds it useful to have 
implicit_tags set to false.) Default is true.

Implicit elements have the implicit() attribute set.
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This seems to correct the problem or should I say allow the problem to persist. Thanks for all the responses.