It's hard to allow arbitrary IN-BAND data and remain compatible with
SGML; the IN-BAND representation would have to be massaged so that it
didn't contain anything that could be confused with SGML markup,
comments, etc. As your example shows, this might be handled with c-t-e
base64. However, it's better to avoid trying to make SGML
do what it will not do so easily (putting IN-BAND html won't work, but
putting small applets in-band with C-t-e: base64 might).
An alternative is to do what the MIME SGML group is recommending, and
ship multipart/related data instead. The first part is the text/html
text/html document, and the rest of the parts are the other objects
that are intended to be embedded; the first part contains 'cid:' URLs
that are the content-IDs of the subsequent parts.