It's a bit disingenuous to say the templates are parsed with regular expressions. The way lit-html generates DOM Templates from strings is by letting the browser parse the string through innerHTML. The purpose of the regexes you are referring to is to find the correct insertion points for dynamic values in the template, and has nothing to do with the HTML parsing process.

There is nothing fundamentally wrong with using innerHTML to parse HTML strings. You use the same parser for the content of index.html, and I don't think anyone is advocating to replace index.html with a single script that creates these nodes using a virtualDOM type rendering system.