Using MW 1.25.1, I cannot seem to get the template parameter to work. Here are some examples using "Test Page", "Test Page/Subpage {1|2|3}", and "Template:Subpage list template" with the definition: "There is a subpage named {{{1}}}".
Works
{{#subpages:}}
- Subpage 1
- Subpage 2
- Subpage 3
{{#subpages:pathstyle=full}}
- Test Page/Subpage 1
- Test Page/Subpage 2
- Test Page/Subpage 3
* {{Subpage list template|Test Page/Subpage 1}}
* {{Subpage list template|Test Page/Subpage 2}}
* {{Subpage list template|Test Page/Subpage 3}}
- There is a subpage named Test Page/Subpage 1
- There is a subpage named Test Page/Subpage 2
- There is a subpage named Test Page/Subpage 3
Fails
{{#subpages:template=Subpage list template}}
- {{Subpage list template|Test Page/Subpage 1}}
- {{Subpage list template|Test Page/Subpage 2}}
- {{Subpage list template|Test Page/Subpage 3}}
So it appears that the list is generated correctly, but the resulting output is not passed through the template renderer.
Any clues about what could be preventing the output from being rendered as part of the extension when it renders as part of the page correctly?