http://www.phpbuilder.com/columns/david20000512.php3
this article discusses using PHPLIBs Templates.Inc. i have found it to be very useful. underneath the article on the page is some discussion/questions/answers regarding using the template engine.
your problem with the STYLE tags can be solved in the same way as the JavaScript Problems covered in the article discussion.
it stems from the curly brackets {}. they are used by phplib templates.inc, javascript, and STYLE tags. templates.inc thinks that your STYLE tags are template holes with nothing to plug them. by default templates.inc deletes everything in {} that isn't filled by some sort of content.
you can either configure templates.inc to leave all unfilled brackets alone, or you can modifiy it to use a different qualifier: (-{ }-) instead of {}.
i chose the former over the latter for my purposes and it works fine.
-dolphinsnot