In our work we have a Netscape/IE plug-in which receives downloaded 
XML and stylesheet data, and sends a resulting HTML stream to the 
browser rendering engine.  We have certainly found it useful on occasion 
to include sections of HTML data which are skipped by the XML parser 
and sent without modification to the browser.  Our browser is set, for 
the moment, to accept both <HTML> </HTML> sections within XML, 
and also <XML> </XML> sections within HTML sections.  
It would seem  to me that when browsers are able to operate in either 
HTML, or XML + XSL modes, then being able to switch modes within 
a document (being able, in effect, to embed in either direction) could 
indeed become quite relevant and useful.  
Boris Moore
RivCom
"Publishing Structured Information"
www.rivcom.com