Could this be considered a valid mergesort?
No, it is not a merge sort. It never accounts for the fact that list1 is already sorted. Instead it performs len(list1) insertions, every time traversing list2 from the very beginning.

Each call to mymerge is quadratic with respect to the length of the list). At each recursion level \$r\$ there are \$2^r\$ fragments of length \$\dfrac{n}{2^r}\$, so each recursion level will take \$O\left(r\left(\dfrac{n}{2^r}\right)^2\right)\$ time, and summing up for \$r\$ from \$1\$ to \$\log{n}\$ yields the total complexity \$O\left( n^2 \log{n}\right)\$.

The expected runtime of merge sort shall be \$O(n\log{n})\$ (or \$O(n \log^2{n})\$ if done in place).