Time to get stupid. Building my own XML variant turned out to have one issue I found irritating - runtime binding for nested components makes doing css and javascript manipulation too hard (you don't know what something is called until runtime). Since I really want to do dynamic client stuff, I decided to look at all-javascript framework ideas for a bit.
If I built a web framework that used javascript to generate all user content (ie manipulate the dom) I could run it in the client and the server to create whatever I needed. Rhino (the mozilla javascript implementation at Rhino is written in java, and I read somewhere would be in Java6. Performance of Rhino is on par with Groovy, JRuby, etc and probably not much slower than Ruby in general; so its not entirely unreasonable to use it on the server side. I expect with caching of anything static (like for example this blog page) you would barely notice the issue. After all people love Ruby On Rails and it isn't known for jet-like performance.
So, time to take Rhino for a walk.
Edit: Apparently other people are trying this as well :
http://www.bluishcoder.co.nz/2006/05/server-side-javascript.html
http://www.bluishcoder.co.nz/2006/05/server-side-javascript.html
http://www.manageability.org/blog/stuff/javascript-in-the-server/view