I might want to add some difficulty to this discussion. I actually planned to hold any discussion on this issue until I had thought about it a little longer, and propose it for 0.9, but I just want to mention it.
At Hyves we have always supported our own markup language, using ubb-like codes ([b] [i]), and custom smilies.
Now obviously this is not a problem for the gadget developer, except that quite some users use these tags in their nicknames, and nicknames are the primary display name for Hyves users.
As I said, we're still thinking on how to implement this correctly into OpenSocial (and I don't want to hijack this thread by starting that discussion), however I just wanted to mention it.