Alternatively, we can go the other way, and dispense with the arrow:

  \x \y x + y

rather closer to the lambda notation in maths, and works well for compact expressions such as S from the SKI combinator calculus:

  \x \y \z x z (y z)

This looks much better with syntax highlighting (hard to demonstrate here of course), being both trivial to implement and informative - just have the back slashed tokens in blue or whatever.

Cassette looks really nice - great intro page, and a great name too! Making something simple is much harder and more valuable than making something complicated.