I think providing a purpose-built editor is a great idea, but I don’t think it needs to be mutually exclusive with allowing access to the familiar editor. Would you consider using the EditTemplateBody cascade to replace the default editor with your own? That would allow you to keep the edit button in its standard place.
I’ll admit I may be biased in this regard. As a habitual tinkerer I feel my frustration spike every time I encounter a read-only wiki in the wild… second only to editions that hide the Control Panel, or (god forbid) the Advanced Search. But I do think it’s important to allow people to edit tiddlers in their own wikis through whatever means they find most comfortable, though — even if that leads to them making sub-optimal choices or just staring blankly at your code.
BTW in case you missed it, I did edit my previous post with both a solution for you and my best guesses as to what wasn’t working.