Ahh, webs. I used it for a while, and while the tools on there are great, the rest of the service is horrible.
Anyway, try creating the file on your computer, then uploading it. If that doesn't work, I think you're screwed. Look at the options, settings or whatever it was too...there may be a way to switch from htm from html. I doubt it would be there, since Webs is so uncustomizeable, but it's worth a look.
If you really want to use Google Webmasters, you can also get a faster website and get rid of the ads by switching to
http://byethost.com/ The drawback is that it's a little complicated to learn your way around the first time you use it (it took me around 3 days to figure it all out, and I'm pretty good with computers), and you won't have tools to really create a good website with. If you really don't want to learn HTML, try downloading
Kompozer, but I strongly recommend learning at least basic HTML. The rest you can figure out when you need it just by Googling it.
If you choose to use byethost, PM me with any questions. I'm currently using it for my website, and it's great, but it can be very difficult to figure your way around it.