Nick has brought up an interesting point on his blog. In the context of a debate about Psub, he has essentially pointed out that those who favor Penal Substitution are rather misusing a term. If one follows the rabbit trail logically, it's hard to see how propitiation and Penal substitution can go together.
When we think of the word propitiation, most people think of God's wrath being vented upon Christ rather than on those who have sinned (i.e. everyone else). God's wrath is turned away from us and delivered to Christ instead. This upholds God's sense of Justice (so the theory goes) because the punishment for sin has been meted out.
But, as Nick points out, that is not what propitiation even means. Propitiation means "to (re)gain another's favor." Etymologically it refers to making another gracious toward you. In the 1st century it referred to appeasing pagan gods through sacrifice. These sacrifices neutralised these pagan gods.
The thing is, nowhere do we find the actual wrath of these pagan gods actually being vented. The idea was not that someone else received the wrath. The wrath was not "turned away (to someone else)." Rather the gods repented of the wrath due to sacrifice.
And so, it seems you cannot really have both propittiation and Psub. You can say God vented wrath upon Christ, but in that case the wrath was not turned away, it actually occurred (just not on us). Or, you can say that propitiation occurred because of any number of reasons ("Jesus, the new Adam, was faithful unto death and hence caused God to repent of the wrath humanity deserved" is but one of many, many options).
If you say "God sacrificed Jesus as a sacrifice to Godself, and that appeased God." then we have lost the substitution aspect because now Jesus is not being punished due to our sins but rather as a blemishless sacrifice. Jesus can either be a sinless sacrifice to appease (propitiate) God, Jesus can "absorb" or have "transferred to Him" the sin of mankind and suffer in mankind's place, but you cannot have it both ways. In the first case we have propitiation. In the second we have substitution.
And this really gets back to another observation: the only sacrifice in the OT that involved transfer of sin was the scapegoat sacrifice (and the "live bird" sacrifice for lepers, perhaps), and that is the one sacrifice that was not killed. And for very good reason: had the sacrifice died in the camp, it would have defiled the camp. The scapegoat was meant to "take away" the sin, not merely suffer for them. The lamb that was sacrificed would have defiled the temple (rather than cleansing it) if it had sins transferred to it. [See Leviticus 16:21-22]
Jesus is not mentioned once as a scapegoat offering, which is odd, as He is mentioned as almost every other type [passover, sin offering, guilt offering, burnt offering come to my mind without looking].
So, those who adhere to Penal Substitution need to come up with a different term because what they claim is happening does not fit the meaning of "propitiation."
If you absolutely want to make Jesus a scapegoat and want to adhere to penal substitution, then you should no longer consider Jesus' death as a sacrifice. The "sacrifice" would then be God's releasing Jesus into the hands of men (Luke 22:53 and note Jesus words to Pilate in John 19:11).
There is actually some support for this notion, as it makes more sense of the "three days and three nights in the belly of the earth" prophecy. The idea is that Jesus time in "the belly of the earth" was the time He was within the power of humanity to do what they pleased.
Thus we have an odd role-reversal here. In cultic Judaism, the sins are placed on the goat and let loose for God to punish. Now God (in Jesus) is given the sins of humanity and let loose for humanity to punish. In this sense, God was not sacrificing Jesus to Godself but rather was sacrificing Jesus to mankind to do with what they desire.
NOTE: I'm not supporting the above theology...just presenting the sort of atonement theology you have to accept if you really want a "substitution" atonement where sins are transferred to Jesus. Now, if you do not want the actual sin transferred to Jesus. Most Penal Substitution types adhere to this type [where both sin and punishment are commuted to Jesus], but one could allow for a type of Penal Substitution wherein the sins were not transferred to Christ while God's wrath was. I know this sounds like God is then being unjust, for Christ is now being punished for sins Jesus never did...even statutorily. But I think a case could be made for it. There are other examples where someone bore the burden/consequences/punishment of a sin without bearing the guilt. Indeed, that is how Athanasius saw original sin. We all bore the consequence of Adam's rebellion but not Adam's guilt.