Your comments

I'm on the Working Copy beta, and it works OK with Textastic. I'd like the file picker to be a little easier to use (i.e., I miss the smoothness of having the sidebar with the file tree, and would like to be able to edit an entire folder easily), but I suppose that'll only improve.
Well, I recorded a little screen capture for you: (link will last for 90 days)

(this is a fairly feeble Mac and I have a VM going in the back, but you can see the app beach balling in Activity Monitor even if Quicktime Player doesn't update the cursor)
This has never worked for me. I've never been able to edit an HTML file and associated JS, switch to the preview mode, enter the WebDAV server URL and have it Just Work. The most common outcome is a hung webview - I can only load documents occasionally.

Actually, I've been fiddling around with this and I can't seem to get it working.

I'd love an easy way to have the iPad serve HTML and JavaScript over HTTP so that I can test basic XHR and dynamic JS loading (which currently doesn't work from files due to security restrictions).

Update: I've been trying to reproduce this unsuccessfully. Will let you know if it happens again (now I have both files stored on the server, just in case)

Nearly every time. iPad 3, iOS 6.1.3. index.html was local (until I lost it irretrievably), js/waterbug.js was fetched from an SFTP server.

waterbug.js overrides the local console (which is the only weird thing it does)

I also had the WebDAV server running for a bit (which is the only other thing that might access files)

Nope. I never selected it. Actually, I didn't notice this until I typed "open output.html" in a terminal window and it opened Textastic instead of Safari. I don't think I even edited an HTML file in Textastic yet.

And yes, this is in ML. Just reverted back to Safari in the Finder.

Not picky, really. David's suggestion prompted me to try

alias tt='open -a Textastic "$@"'

Which works, although I'm not married to that name :)

Awesome screenshot, I can't wait.

My usage of Markdown is fairly wide-ranging, but I do tend to create fairly complex documents in it, so syntax highlighting is pretty much essential - that's why I use TextMate for writing.

In terms of quantity, most of my Markdown output goes to my web site - I fish out a small template with 5 or so lines of headers and metadata (by the way, a shortcut for inserting the current date in YYYY-MM-DD format would be nice), type up a post adding mnemonic references to links I need to add and footnotes (hence my interest in Markdown Extra, which supports the [^1] notation for footnotes) and finish off by filling in both links and footnotes at the bottom and uploading the file (incidentally, I use .txt, and post to my site directly via Dropbox).

As to stylesheets, I could live just fine with it being a "special" CSS file inside Textastic - it is, after all, a programmer's editor... :)