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"Appending inert DOM to a document node makes it go "live", as if the DOM tree was just parsed from markup (setting innerHTML)." This doesn't make much sense. Presumably appendChild won't serialize + reparse the contents. Possibly you mean some of the state flags will be reset? In general for items with state e.g. script it's not clear what will happen to the state when the node is in a <template> and what will happen when it is moved outside the template.
Can you help me understand which part doesn't make sense? As far as describing the effect, it seems the sentence is ok. Are you looking for a more detailed explanation of what happens? I could probably add a summary of template insertion algorithm from http://dvcs.w3.org/hg/webcomponents/raw-file/tip/spec/templates/index.html#dfn-template-insertion-algorithm.
I changed the explanation in the explainer in <https://dvcs.w3.org/hg/webcomponents/rev/33914fc2661a>