Oh, it's definitely broken here! There are also some nested lists that should not be nested, and some wandering bullets.

I am not intending to put anything in fixed-width fonts.

I think it's mostly that there's something going on with an interaction between the way HTML (as used in the AO3 code, which already sometimes goes weird on DW if people get fancy in their summaries) strips all whitespace, DW only strips *some* whitespace and keeps some, and Markdown uses whitespace for syntax and is confused by all that?

(It was also choking on smartquotes in a very strange way, but that was so bad I actually went in and fixed those.)