The ProDevTips.com site has a little something to say about PHP as a templating language it sucks:
I frequently read articles about why any template system made with PHP is per definition redundant because PHP is itself such a good templating engine. This is my take on this whole rantgenre.
He points out an article from the why it doesn't suck sort of from Brian Lozier that he thinks misses the heart of the issue. He suggests the opposite, however that PHP as a templating language (templating software written in PHP sitting on top of a PHP application) is a really bad idea. It only adds overhead that most developers, unless they're experienced with the technology enough to know how to use it, will only work around (like the {php}{/php} tags in Smarty).