Any ideas? I am sure its simple but I have missed something here.

When in doubt, write a short test.

use HTML::Template;  # version 2.6

my @template = <DATA>;
my $template = HTML::Template->new(arrayref => \@template);

$template->param(ZERO => 0);
$template->param(ONE => 1);

print $template->output();

__DATA__
Zero = <TMPL_VAR ZERO>
One = <TMPL_VAR ONE>
[download]

produces the expected result

Zero = 0
One = 1
[download]

You might have run into a version-dependent bug, or you might have a problem upstream. What happens when you try to replicate the problem with a small example?

Update: jeffa points out that   my $template = HTML::Template->new(filehandle => *DATA); is another way to go.