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I think this method is avoiding photoshop is only really usable if you have already produced wireframes to which you are going to base your design on. I use Axure for this, it is an excellent solution for rapid wireframing and prototyping.
The reason why I say this would only be practical with wireframes already made is because it can be time consuming drastic changes to the layout in a markup based mockup. Whereas making layout changes on your wireframe simply involves draging and/or resizing a few rectangles.
Additionally, some people may find it hard to express creativity when starring at a blank browser screen, knowing that each of their crazy ideas would require markup and css styling, whereas once again in a wireframing environment this would take a matter of seconds.
So I feel this can be usefully implemented assuming that you are not cutting corners in the planning and analysis of the project and producing wireframes as you normally would. This method also assumes that your designers are well versed in CSS and xhtml.