Got escaping of text working, I think.

lib/handlebars.js

@@ -2,8 +2,6 @@ Handlebars = {
   compile: function(string) {
     var compiler = new Handlebars.Compiler(string);
     var result   = compiler.compile();
-    console.log("Template: " + string);
-    console.log("Code: " + result);
     return new Function("context", "fallback", "fallback = fallback || {}; var stack = [];var partials = {};" + result);
   },
 
@@ -11,7 +9,16 @@ Handlebars = {
     return toString.call(fn) === "[object Function]";
   },
 
-  escape: function(string) {
+  escapeText: function(string) {
+    string = string.replace("'", "\\'");
+    if (string.slice(-1) == "\\") {
+      string = string + "\\";
+    }
+
+    return string;
+  },
+
+  escapeExpression: function(string) {
     // don't escape SafeStrings, since they're already safe
     if (string instanceof Handlebars.SafeString) {
       return string.toString();
@@ -179,7 +186,8 @@ Handlebars.Compiler.prototype = {
 
   addText: function() {
     if(this.text) {
-      this.fn       = this.fn + "out = out + '" + this.text + "'; ";
+      console.log("out = out + '" + Handlebars.escapeText(this.text) + "'; ");
+      this.fn       = this.fn + "out = out + \"" + Handlebars.escapeText(this.text) + "\"; ";
       this.fn       = this.fn + this.newlines;
       this.newlines = "";
       this.text     = "";
@@ -190,7 +198,7 @@ Handlebars.Compiler.prototype = {
     var expr = this.lookupFor(mustache);
     var escapeCall = "(";
     if (this.escaped) {
-      escapeCall = "Handlebars.escape(";
+      escapeCall = "Handlebars.escapeExpression(";
     }
 
     this.fn += "if (Handlebars.isFunction(" + expr + ")) out = out + " + escapeCall + expr + ".call(Handlebars.buildContext(context, stack))); ";

test/handlebars.js

@@ -26,7 +26,12 @@ test("boolean", function() {
                   "booleans do not show the contents when false");
 });
 
-test("escaping", function() {
+test("escaping text", function() {
+  shouldCompileTo("Awesome's", {}, "Awesome's", "text is escaped so that it doesn't get caught on single quotes");
+  shouldCompileTo("Awesome\\", {}, "Awesome\\", "text is escaped so that the closing quote can't be ignored");
+});
+
+test("escaping expressions", function() {
  shouldCompileTo("{{{awesome}}}", {awesome: "&\"\\<>"}, '&\"\\<>',
         "expressions with 3 handlebars aren't escaped");