Thank you so much riven. I thought one of the js functions was supposed to take my parsed textile (now html) and put it in preview.html.
It just didn't dawn on me to pass an entire view back.
So, for anyone else this is what I did.
Then in my controller:
@textile = RedCloth.new(params[:data]).to_html
render :layout => false
and then in my parse_textile view:
<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN"
<html xmlns="http://www.w3.org/1999/xhtml" xml:lang="en" lang="en">
<meta http-equiv="content-type" content="text/html;charset=UTF-8" />
<%= stylesheet_link_tag 'styles_for_the_parsed_textile' %>
<%= @textile %>
I just made it a complete html page since I didn't want the preview to be in my site's layout.