Couldn't you include templates recursivly?

Children.tmpl:
...
<TMPL_IF Children>
<TMPL_LOOP Children>
<TMPL_INCLUDE Children.tmpl>
</TMPL_LOOP # end looping on the children>
</TMPL_IF   # closing the optional children>
[download]

Just make sure to adjust max_includes to a level higher than the max number of generations you might encounter.