Note that my favorite "handlebars-like" template engine is currently "spacebars", developed as part of the meteor.js project. This does safe structured interpolation, so it's not really a "string-based" template engine any more -- but it still contains the same minimalist markup (it basically looks identical to handlebars, it's just a new implementation).
I've worked some with gwicke on spacebars support for his templating project.
The other important aspect which I haven't seen mentioned yet is editor support. Where does using the template system fall, on a scale with "writing an article for humans" on one side and "writing executable code" on the other?
Even this is not necessarily straightforward to assess. As I understand it, one of the advantages of KnockOff is that, although at a raw HTML level it looks cumbersome for a human to author, it is structured in a way that would make it easier to integrate with something like Visual Editor, with simple properties that can be added to sample text to turn it into a template.
I personally lean toward "handlebars"-style engines, because the extremely minimalist syntax makes it easy for non-coders to author directly. A user-friendly editor for such a template language would probably expose separate "content" and "code" views of a template. Basic templates wouldn't have any code, but advanced templates would use something like Scribunto for easy editing of the code associated with a template. --scott