JSX was also created with the intention of using traditional conditional/looping constructs, but that hasn't stopped Solid and Preact from repurposing it for fine grained reactivity. Preact's signal implementation has Solid-like Show/For components [1].
I won't speak for the author of the proposal, but given that Lit itself has special control flow mechanisms for conditionals and loops (the cache and repeat directives respectively [2][3]), I can't imagine the proposal being too opposed to these mechanisms.
The repeat directive I mentioned as an example of a custom looping control flow construct used in a tagged template is the exact same one another commenter later mentioned (and you responded to) here by the way: https://news.ycombinator.com/item?id=44441002