Is there an existing good example, or how should one approach creating a basic Template system (thinking MVC) that supports "Template Inheritance" in PHP5?
For an example of what I define as Template Inheritance, refer to the Django (a Python framework for web development) Templates documentation: http://docs.djangoproject.com/en/dev/topics/templates/#id1
I especially like the idea of PHP itself being the "template language", though it's not necessarily a requirement.
If listing existing solutions that implement "Template Inheritance", please try to form answers as individual systems, for the benefit of 'popular vote'.
The PHP language itself was designed for just these tasks, [unfortunately] it became capable of more and more over time and people who had started out with that simple syntax started implementing more and more complex tasks with that strangely evolved language.
I think what you mean with template inheritance is best expressed as dynamic file inclusion in PHP, as simple as
<? require $content ?>