FWIW, I'v just started playing with jinja (http://jinja.pocoo.org/), and
results look promising.
My primary goal now is to understand how to (minimally) refactor the
existing core code such that alternative template engines can be
configured via config.ini.

(FWIW, I do not agree that any template language ought to be XML-based.
But as lu_zero says, this shouldn't become a language discussion, but
rather a discussion about whether it's possible to open Roundup up to
support TAL alternatives.)