Hi,
We have tested the latest build and using a file Url works fine. For example, if you use "file://c:/test.pdf", then that Url will be preserved.
The rule of the link Url is that:
1. If it is an absolute Url, then it will be preserved. For example, Urls such as "file://c:/test.pdf", "http://www.google.com/test.pdf", will be preserved as is;
2. If it is a relative Url, then it will be combined with your current page's BaseUrl. For example, if you are converting a page "http://www.yoursite.com/App1/Page1.aspx" and you have <a href="pdfs/test.pdf"></a> in your HTML, then "pdfs/test.pdf" will be combined with your base Url "http://www.yoursite.com/App1" and forms the full Url of "http://www.yoursite.com/App1/pdfs/test.pdf".
Hope this helps. Please let us know if you see something differently.
Thanks!