Re: IE8 rending PIE html as text (when using Knockout 2.0)
I'm not familiar with Knockout but it sounds like it's trying to rewrite contents of the page by copying innerHTML -- there are two big problems with this approach:
1) IE has a nasty bug where it returns invalid HTML (like you're seeing) when querying innerHTML that contains VML elements
2) PIE expects to have control over its own rendering elements and to be able to maintain references, but by copying innerHTML it is breaking those references. This is not an issue unique to PIE, and I expect it would cause problems with any other script that maintains DOM references.
I'm not sure what advice to give you, perhaps the Knockout developers would have more insight. I don't see any feasible way PIE could avoid these issues.