Linking to PDF Named Destinations

I have a customer who wishes to configure his PDF's so that he can manage external references to named destinations from a source PDF to a target PDF.

He is using the <refext refloc="target.pdf#nameddest=mytarget">text text text</refext>

Does he need to author via Insert>Link Target into the target PDF named destination at element level ?

Also, to get it to work, do all the PDF's need to reside on a web server ?

Regards,

Andy