A couple quick, important clarifications:
The parse does not turn the custom tags into divs, there is no need to do that. These are fully capable, valid tags and exist in the source just the way you write them: <moz:sometag></moz:sometag>. Check out the demo linked to in the repo and you'll see ;)
Also, the way the code works is even a bit better than you described in the dynamic creation case. Let's take your example:
var slider = document.createElement('slider');
you would actually receive a _fully inflated_ element that is already event-bound when it is returned out of document.createElement, pretty sweet right? The innerHTML value of slider would literally read:
"<moz:sliderknob></moz:sliderknob>"