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I've never used Mustache so I can't really say much on that. If you're doing everything in Nix, the standard library already has toJSON function so that may save you a passage. That's what I'm using for my Alacritty config through the home-manager module.
Yep, I'm using the toJSON function already. The problem I had, was that not all applications use JSON as configuration format. Also the nix code gets very long, if you have to write the whole template as a string, which I find quite unreadable. Mustache is a pretty simple frequently used templating language, here is an example template that get's rendered by the nix code above.