Not that we are working in the .net/web domain, but home-made code generations tools from various home-designed languages are a crucial part of our development tool chain. We have two major such tools (with grammars and parsers and formal definitions), and a host of minor one built on macros like m4 and perl. They all generate plain C in the end, which is natively compiled.
Domain-specific languages are one of the key tools for programmer productivity for any large-scale software endeavor in my experience. If you are building things like compilers, simulators, or other very complicated software with many recurring patterns that have no support at all in the basic languages (which typically means portable C and sometimes C++), code generating tools is the way to go. I view domain-specific languages as the next step in generalization: first you break out common computations into functions (or subroutines to be historical), then you break out common functions into templates or generics if such a facility is available, and then you break out even more commonality and repeating code into a full-blown custom language.
It is all about reducing the volume of code you actually write, and removing any form of tedious repetition and non-value-added code from the programming process. As soon as patterns repeat, apply a domain-specific language!
