$', $`, and $& are all equally bad. Using any of them anywhere in your program will penalize every regex you do.

I'd suggest trying like this. As GrandFather mentioned, it would be easier to test with some test data, so this is just a complete WAG.

my $result="";
my $re = qr/
            (.*?)   # Everything before the first tag
            $this->{mask_start}
            \Q$key\E(.*?)
            $this->{mask_end}
            (.*?)
            $this->{mask_start_close}
            (?=(.*))  # capture the rest, to get end of template
           /x;

my $trailingText;

while($this->{template} =~ /$re/g) {
    $result.=$1;  # add the stuff between tags to results
    my $params = $this->mask_block_params($2, $3);
    my $html = &$callback($key, $params);
    $result.=$html;

    $trailingText=$4;
}

$result.=$trailingText;

# $result should be what you're looking for.  I think :)
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