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 rant-genre.

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).