What happens when you need to update some deeply nested child element without re-rendering the whole tree? Suddenly you need some system of labeling the children, how to find them in the dom, how to update them, how to keep them in sync with the state... a vanilla JS solution becomes extremely unwieldy as soon as you step out of the "global pointers to elements" phase (what the project in the OP is). Lit-html is an example of a tool that solves this problem in tiny package- less than 1KB- and you can continue using string templates with that.
I mean speaking for myself, I mostly make robotics web apps which isn't the most typical of web applications but the times this sort of thing is needed are few and far between.
So yes, this pattern is helpful for solving that sort of thing when it occurs (and if the use case is even substantial enough to warrant it) and Lit looks like it would fit that role reasonably well, but basing the entire site on this principle as a full on framework seems a bit ludicrous.
What html actually lacks is the option to include external html part files, but there are lots of ways to do that serverside that don't involve the stupid idea of putting html into strings in js files for literally everything.
