Genuine question, here, since I've never done any web dev. Why not write libraries in an existing language that spit out HTML/Javascript/PHP/whatever? Why do we need a new language to do this?
On the server side it's already pretty easy to use whatever language you want. There's the CGI protocol that gives a well defined interface between the server and any arbitrary program running as its own process. Most servers also have a way to run code in written various languages directly without the overhead of spawning a new process to do it.
On the browser side you have Javascript and... Well, that's about it really, unless you want to rely on browser plugins. Some browsers on some platforms can handle other scripting languages, but they tend to be vendor-specific like VBScript. If you load a browser plugin you can do anything you want, but it's not going to be all that portable. And, as we've seen with Flash and Java, they can open up new and interesting security holes.
Javascript itself is kind of a mess. It's inconsistent and has a lot of pitfalls that can trip up the unwary. I don't think we need more languages necessarily, but we could certainly use one good language. Of course, you'll never get developers to agree on what that good language is, and by the time it makes its way through the standards committee it's going to look an awful lot like Javascript. The big problem with defining a new language is that it needs to be in all the browsers before it's useful to developers. Developers won't adopt a language that's not widely deployed in browsers, and browser vendors won't bother to implement a language unless there is a critical mass of developers for it. So at this point we're pretty much stuck with Javascript.
Microsoft actually had a good idea at one time, which was to define an interface between the browser and an arbitrary external scripting language. You could (and probably still can) write Perl or Python code and execute it within Internet Explorer just like Javascript or VBScript. Of course that required the user to install the particular language you wanted, and calling out to an arbitrary external language opened up a ton of security holes. It wasn't very useful for web-based scripting. It was pretty good if you wanted an easy way to add a GUI to a local script, though. I used it to write a few quick-and-dirty prototype apps in Perl with an HTML GUI about 10 years ago. In fact it was good enough that I had a hell of a time convincing our sales guys that it was not a finished product they could sell.