[php] Is there any way to return HTML in a PHP function? (without building the return value as a string)

Yes, there is: you can capture the echoed text using ob_start:

<?php function TestBlockHTML($replStr) {
    ob_start(); ?>
    <html>
    <body><h1><?php echo($replStr) ?></h1>
    </html>
<?php
    return ob_get_clean();
} ?>