After I upgraded my board to 1.6.9 the template editor is just a normal textarea and doesn't have the syntax hilighting or any other codepress feature. NOTE: I did make sure it was still enabled in my admin preferences.
I'd be surprised if it still works at all to be honest. We really need to replace it at some point...
Any how, what browser are you using? Have you tried to reupload the admin directory from a fresh package?
I'm using google chrome. I did try to re-upload from a fresh package, I also tried it in firefox, and even ie with no luck. it worked fine before the upgrade