XHTML Validator Question

The error:

———-
Line 145 column 7: document type does not allow element “h2” here; assuming missing “li” start-tag.

<h2>Search:</h2>
———-

I assume it is asking me to put DIV tags around the H2 tags, correct? The problem is I do have a separate DIV assigned for the search form and the H2 – Search – /H2 is between those tags…

Sidebar code:

<div class="sidenav">

<!-- sidebar -->

<ul>
    <?php if ( function_exists('dynamic_sidebar') && dynamic_sidebar() ) : else : ?>

    <?php global $notfound; ?>
    <?php /* Creates a menu for pages beneath the level of the current page */
    if (is_page() and ($notfound != '1')) {
    $current_page = $post->ID;
    while($current_page) {
    $page_query = $wpdb->get_row("SELECT ID, post_title, post_status, post_parent FROM $wpdb->posts
    WHERE  ID = '$current_page'");
    $current_page = $page_query->post_parent;
    }
    $parent_id = $page_query->ID;
    $parent_title = $page_query->post_title;

    if ($wpdb->get_results("SELECT * FROM $wpdb->posts WHERE post_parent = '$parent_id' AND post_status
    !=  'attachment'")) { ?>
</u>

<div class="sb-pagemenu">
    <h2><?php echo $parent_title; ?> <?php _e('Subpages:'); ?></h2>
    <ul><?php wp_list_pages('sort_column=menu_order&title_li=&child_of='. $parent_id); ?></ul>

    <?php if ($parent_id != $post->ID) { ?>
    <a href="<?php echo get_permalink($parent_id); ?>"><?php printf(__('Back to %s'), $parent_title ) ?></a>
    <?php } ?>
</div>
    <?php } } ?>

    <?php if (is_attachment()) { ?>
<div class="sb-pagemenu">
    <a href="<?php echo get_permalink($post->post_parent); ?>" rev="attachment"><?php printf(__('Back
    to \'%s\''), get_the_title($post->post_parent) ) ?></a>
</div>
    <br/><br/>
    <?php } ?>

    <h2><?php _e('Search:'); ?></h2>
    <form id="searchform" method="get" action="<?php echo $_SERVER['PHP_SELF']; ?>">
    &nbsp;&nbsp;&nbsp;<input type="text" name="s" id="s" size="10" />
    &nbsp;<input type="submit" value="<?php _e('Go!'); ?>" />
    </form>

    <h2>Product Categories</h2>
<ul class="sidemenu">
    <?php wp_list_cats(); ?>
</ul>

    <h2><?php _e('Meta:'); ?> </h2>

<ul class="sidemenu">
    <?php wp_register(); ?>
    <li><a href="http://validator.w3.org/check/referer" title="<?php _e('This page validates as XHTML
    1.0 Transitional'); ?>"><?php _e('Valid <abbr title="eXtensible HyperText Markup
    Language">XHTML</abbr>'); ?></a>
    </li>
</ul>
<?php endif; ?>

<!-- end sidebar -->
</div>
<div class="clearer"><span></span></div>
</div>

CSS Code:

/* sub navigation */
.sidenav {
	float: right;
	width: 210px;
        background-color: #E8E5DD;
}
.sidenav h2 {
	color: #333300;
	font-size: 1em;
	line-height: 30px;
	margin: 0;
	padding-left: 12px;
}
.sidenav ul {
	padding: 0;
}
.sidenav li {border-bottom: 1px solid #D2D3BD;}
.sidenav li a {
	font-size: 1.1em;
	color: #333300;
	display: block;
	padding: 6px 0 6px 5%;
	text-decoration: none;
	width: 95%;
        background-color: #E8E5DD;
}
.sidenav li a:hover {
	background-color: #E8E5DD;
	color: #654;
}

Where’s my error?