Make sure and post about it when you do - I definitely want to see more momentum around this and was pleasantly surprised when I saw that solutions already existed. My favourite thing about it is that it transcends "technology". The fact that you've been working on this is no loss to someone else who's been working on something similar as the cost of changing from one solution to another is so dramatically low when all the value is retained within the templates themselves.
Likewise. Two other template engines you might be interested in are Knockout.js (http://knockoutjs.com/) and the template engine from the Lift web framework. Both play relatively well within HTML.
And Stanford has done some nice work on segmenting the DOM into semantic chunks. The site appears to be down now, but it's usually hosted at http://bricolage.stanford.edu/. Check out their paper on the "Bento" algorithm.
The lift book is worth a quick look if you are interested in templating engines. In short, instead of logic in the view, css selectors are used on the server side to transform small chunks of the website in a statically typed and safe (the dom structure is carried around as xml instead of a string which makes it possible to prevent most of the common security problems on the web) way http://simply.liftweb.net/
