ws-preserve in templates produces garbage in output

[granicz]

I have a template file with the following fragment:

<p>This won't be hidden</p>
<p ws-replace="HideMe">Is this going to show up?</p>
<div ws-preserve>
    ${Hello}
    <p ws-replace="WontHide">Is this going to show up? Hope so...</p>
</div>

After leaving HideMe unassigned, it correctly gets removed from the DOM, but the ws-preserve block produces the following: