enigma1 - 4:29 pm on Oct 10, 2010 (gmt 0)

So the template can be in www.example.com/design/templates/blue-template/ and you can use background: url(images/arrow.gif) safely with NO base element as the image will be loaded from www.example.com/design/templates/blue-template/images/arrow.gif.

You are simplifying things too much.
Document base:

<base href="http://www.example.com/test-site/">

Stylesheet and under it various images:

<link rel="stylesheet" type="text/css" href="includes/template/stylesheet.css" />

Request using an SEO URL:

http://www.example.com/test-site/constructs/

Won't work without the base element set. So it becomes relevant and is not working because now the browser will use the requested link and add the template path. It's typical configuration with many sites. You cannot ignore it.