Have just read your post. If I understand your post correctly your trying to use an statement like:
This code would look for a 'myfunctions.php' file in a 'functionlibrary' directory relative to where your page is.
The second part of your post seems to say that you are trying to put this statement in an html file. That won't work as .html are straightforward markup files that the server simply transmits. If you want to get the server to include the .php file and then execute its contents before sending the resulting html to the user, you will need to create an initial .php file to put the include statment in and then call that.
Drop me a PM if that doesn't make any sense or you need any further clarification.