Thanks for tackling this! This is a good start, but it doesn't fully mirror the behavior of the layout implementation because the smart quoter state is local to a single HTML element's body. This means, for example, the example below does not work correctly:

"Hello *World"*

<p>“Hello <strong>World“</strong></p>

To fully mirror the layout implementation (which is paragraph local), we'd want to somehow keep the state in inline contexts, but reset it for block-level elements. It's a little tricky because it would need to span over multiple different realizations. Might take some experimentation to figure out how to transport that state. I had started thinking about this a bit recently, but didn't yet get to the experimentation stage.

Sorry for holding the lock for so long. I don't think I will have the time to think of a clean way to do that anymore.

Revived in #6710