Have you tried closing the tags?  I'm pretty sure if you insert correct HTML, 
it should 
work.

Marking it as WontFix until I hear back.

I can confirm this behavior.  With both an opening and closing header tag (and 
nothing else in the template) I receive an "Unknown runtime error" in IE 7.  
This is the content of my ejs file:

 <h1>fail</h1>

I'll poke around a bit more. The line given is 120 when setting the 
element.innerHTML (I verified the render works correctly).  As a matter of fact 
simply setting the innerHTML to:
  <h1>fail</h1>  
as a hard coded string with an emplate template will cause the same error.

Apparently IE7 doesn't like the H1 tag inside of a DIV tag.  If you change the 
target render area to be (for example) the body tag itself, then everything 
works... since the body tag is obviously allowed to have h1 tags in it.

Not as useful as targetting a div, and as far as I knew divs can contain h1 
tags.