(Updated to thank the proper folks. :) Thanks for all the friendly reminders)

Excellent zaxo and sk! You make it look too easy. :)

zaxo, you are right about the double quotes and that is why I had the "\" before the "$1". In my original try I had single quotes, but there I saw that it wasn't executing, but rather just replacing with exactly what I wanted to execute. So, I want to run this from the cmd line and I'll mix up what the two of you both shared.

I finally went with this (mytool.pl is in my PATH):

perl -i.bak -pe 's/^(mytool\.pl .*)/`$1`/e' test.template

Nice. Thank you both!