Your comments

I plan to submit the update to Apple tomorrow. It should be available one or two weeks after that.
You can add your own TextMate-compatible syntax definitions to Textastic. Please have a look at the manual:

http://www.textasticapp.com/mac/manual/lessons/How_can_I_add_my_own_syntax_definitions__themes_and_templates.html

You can find many compatible syntax definitions by searching for "<language name> tmbundle" in your favorite search engine.

Currently there is no easy way to remove languages though.
If the file is in the same folder, you shouldn't include a folder name in your src attribute. So it would look like this:

<img src="avatar.png" alt="Avatar" />

I plan to submit the new version to Apple tomorrow. It will have Touch ID support.
Hello,

to preview HTML and JavaScript, open the HTML file and tap on the "glasses" button in the top right corner.
Textastic offers syntax highlighting for many languages including PHP, but it doesn't include compilers or interpreters due to restrictions of iOS.

You will notice that all apps that support running code - like Kodiak, Codea and Pythonista for example - do not have file download capabilities. So, if I wanted to add the ability to run code in Textastic, I'd have to remove FTP, "Open In", WebDAV, Dropbox and all other means of sharing files with other apps.

This is what the iOS Developer Program License Agreement says:

3.3.2 An Application may not download or install executable code. Interpreted code may only be used in an Application if all scripts, code and interpreters are packaged in the Application and not downloaded. The only exception to the foregoing is scripts and code downloaded and run by Apple's built- in WebKit framework, provided that such scripts and code do not change the primary purpose of the Application by providing features or functionality that are inconsistent with the intended and advertised purpose of the Application as submitted to the App Store.

These are the relevant points in the App Store review guidelines:

2.7 Apps that download code in any way or form will be rejected
2.8 Apps that install or launch other executable code will be rejected

That's a limitation that is imposed by Apple, sorry.
This works for me in the latest version of Textastic. Maybe there is another part in the file that causes this problem?
In the preview window, you can enable Firebug, but that is really only useful for inspecting elements because it is loaded after the page is loaded and JavaScript is already executed.

Did you try to reference it directly from your HTML as the first script as described on the Firebug Lite site? http://getfirebug.com/firebuglite#Stable

There are certain limits even then. Since Firebug Lite itself is written in JavaScript, it might not be able to catch errors if the site has syntax errors in JavaScript code.