I run a site where users can create a 'profile' for themselves. Basically it's a mini site that they can update themselves.

I would like to allow the users to be able to edit the design of their own site themselves. Basically they will create a template for their website. I want to be able to do this without giving them the chance to do anything bad (so for example, access to the PHP is a no no).

What's the best way to do this?

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Free CSS Tutorials

Let the just edit the CSS of the page.
You make a structure and they can easily edit certain classes or IDs.. That is if you have a fixed layout, but if you want them to make their own page, order the things as they want them..
Use one of the templating engines and give them the variables what they can use.

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Back from sysadmins to the programmers.

Make sure you either strip out or stop CSS like this:
That's a pretty big XSS vector. If you don't only allow edits to css but also to xhtml/html, I suggest using HTML Purifier - Filter your HTML the standards-compliant way!, since that will be very likely to stop major XSS vectors.